President Barack Obama won the Nobel Peace Prize for 2009, making him the 108th recipient of the prestigious award.
The Norwegian Nobel Committee said Friday it chose Obama because of his "extraordinary efforts to strengthen diplomacy and cooperation" among nations. The committee also called out the president’s efforts to rid the world of nuclear weapons.
"The vision of a world free from nuclear arms has powerfully stimulated disarmament and arms control negotiations," said the committee in a statement. "Thanks to Obama’s initiative, the USA is now playing a more constructive role in meeting the great climactic challenges the world is facing."
The announcement was a surprise — Obama’s name had not been mentioned among front-runners — and the roomful of reporters in Oslo, Norway, gasped when he was named.
Former Finnish President Martti Ahtisaari, last year’s Peace Prize laureate, said it was clear the Nobel committee wanted to encourage Obama on the issues he has been discussing on the world stage.
The award comes at a crucial time for Obama, who currently has administration officials dispatched on global peace missions.
Obama’s envoy to the Middle East, George Mitchell, has returned to the region to advocate for peace negotiations between Israelis and Palestinians.
Mitchell met Thursday with Israeli President Shimon Peres. He plans to meet Friday with Prime Minister Benjamin Netanyahu before talking with Palestinian leaders in the West Bank pay day loan lenders.
Secretary of State Hillary Clinton starts a six-day trip to Europe and Russia on Friday to generate international cooperation in moving Iran and North Korea toward ending their nuclear programs.
Obama is only the fourth U.S. president to win the Nobel Peace Prize and the third one to be given the prize while still in office. Jimmy Carter received the award in 2002 for his "decades of untiring efforts" toward peaceful solutions in conflicts around the globe.
Woodrow Wilson, who was president from 1913 to 1921, won the prize in 1919 for developing a 14-point plan for worldwide peace talks.
Theodore Roosevelt, who was in the White House from 1901-1909, won the award in 1906 for his role in mediating a bloody dispute between Russia and Japan that resulted in the Treaty of Portsmouth.
This year’s Peace Prize nominees included 172 people and 33 organizations, the highest number of nominations ever.
The Nobel recipient receives a prize of about $1.4 million. The Peace Prize has been awarded 89 times since 1901. On 19 occasions, including during World War I and World War II, no prizes were awarded.
– CNN Wires contributed to this report.
Russia will need as long as 15 years to free itself of its reliance on raw materials and become a modern economy, President Dmitry Medvedev said.
“That is a perfectly plausible time frame in which to create a new economy, an economy that will be competitive with other major world economies,” Medvedev said in a television interview last night. “Once a significant portion of our revenue is generated by something other than energy exports, let’s say at least 30 or 40 percent of it, then we would already be living in a different economy and a different country.”
Russia entered the credit crisis with its budget and current account in surplus and with the government assuming the world’s third-biggest currency reserves would shield it from the worst of the global recession. Slumping commodity prices shattered that assumption and helped plunge the economy into its worst decline for a decade, forcing the central bank to manage a 35 percent ruble decline in the six months through January.
“I must admit that we sank below our lowest expectations,” Medvedev aid. “The real damage to our economy was far greater than anything predicted by ourselves, the World Bank, and other expert organizations.”
Volatile commodity prices have continued to undermine stability in the world’s biggest energy exporter. Urals crude oil, Russia’s main export blend, fell $100 a barrel between its peak in July last year and the beginning of 2009.
‘Everything Was OK’
Energy, including oil and natural gas, accounted for 69.1 percent of exports to countries outside the former Soviet Union and the Baltic states in the first seven months, according to the Federal Customs Service. About 30 percent of Russian gross domestic product comes from oil and gas, the government says.
“Everything was okay as long as prices for energy and raw materials were high,” Medvedev said. “Then those prices fell. Our economy was hit hard. Our citizens were hit hard.”
Russia should pursue energy efficiency, including creation of new fuels and energy saving, develop nuclear power, information infrastructure, and produce its own medicines, the president said saving account payday loan.
Medvedev, who has called Russia’s raw material dependency “humiliating” and “primitive,” said the economy will contract a “very serious” 7.5 percent this year, compared with an official government forecast for an 8.5 percent decline.
The government predicted last month that the economy will return to growth in 2010.
Clear Challenge
Unemployment remains “very high,” making it “a clear challenge for the president, the Cabinet and other government authorities,” Medvedev said.
The jobless rate fell to 7.8 percent in August, lower than previously estimated, from 8.3 percent in July on rising seasonal demand for agriculture and construction. The number of unemployed was 6 million, the Federal Statistics Service said.
Russia aims to bring down inflation, which was “rampant in this country,” to a range between 5 percent and 7 percent or less, according to the president.
“Then we will be able to lend at normal rates,” he said. “Then our citizens will be able to obtain mortgages and consumer loans at reasonable rates.”
The annual inflation rate fell to 10.7 percent last month from 11.6 percent in August, according to the Federal Statistics Service. Inflation has averaged more than 14 percent a year since 1998.
Russia’s goal is “to achieve a balanced budget or a budget with a minimal deficit within a year,” Medvedev said. “‘All the government’s efforts and decisions should be directed toward this end.”
The deficit held steady at 4.7 percent of gross domestic product in the year through September as the government spent 1.35 trillion rubles ($43.9 billion) more than it collected, the Finance Ministry reported Oct. 9.
Larry Ellison does not have a hankering to add Brocade Communication Systems to his long list of acquisitions.
At least that is what he told investors at Oracle’s annual shareholder conference Wednesday. "We have no interest in buying Brocade," the Oracle (ORCL, Fortune 500) chief said in response to a question from an investor.
Brocade (BRCD), which makes switches, routers and software used in networking, has quietly put itself up for sale, according to a recent story in the Wall Street Journal. The report pointed the finger at Hewlett Packard (HPQ, Fortune 500) and Oracle as likely acquirers.
Shares in Brocade are up about 18% since the news hit. You can almost imagine someone, somewhere rubbing their hands together and cackling as their plan unfolds exactly as planned.
Is Brocade for sale? Sure it is, and always has been for the right price. The company, which had net income of $167 million on revenue of $1.5 billion in its fiscal 2008, does have the heft and product diversity to continue as an independent company.
But with a wave of consolidation going on in technology and recent takeout premiums as high as 60%-plus to share prices, now is a good time for Brocade to "quietly" make its intentions known to everyone.
"Interest in Brocade is picking up, and it is unlikely the company put itself up for sale in the absence of third-party interest," Goldman Sachs analyst Min Park told clients. "Brocade is a likely strategic fit for a number of potential acquirers." Park includes Hewlett Packard, Juniper (JNPR), Dell (DELL, Fortune 500), IBM (IBM, Fortune 500) and Oracle among those.
If the trend in pricing for similar strategic companies continues, demonstrated most recently by the 61% premium Dell offered for Perot Systems (PER), and the 34% bonus above the 12-month high EMC (EMC, Fortune 500) bought Data Domain for (which, if you look at it another way, was 222% higher than the stock’s 12-month low), an offer price for Brocade could come anywhere in a range of $10 to $15 a share on line pay day loans. That is, of course, if Brocade can get a bidding war going.
Goldman Sachs’ Min, who has a "buy" rating on the stock, upped his 12-month target price to $10.50 from $9.50 based on the potential acquisition news, he estimates there is a 30% probability on a 35% acquisition premium to Brocade’s current share price.
So who is most likely to jump at Brocade? Dell has Perot Systems to digest, so it may not be in the mood. It would be a stretch for Juniper financially. HP certainly has the cash, and its EDS acquisition is well underway. So it’s a strong possibility. IBM has the wherewithal too, though perhaps not the stomach for more hardware.
And what about Oracle? It’s possible that Ellison means exactly what he says — that he’s not interested, especially given his focus on Sun (JAVA, Fortune 500). But you can never count him out. If this is the beginning of some M&A courtship involving multiple suitors, there is no one better than Ellison at walking away with the prize (especially if he can make IBM’s life miserable in the process).
Not interested? Not yet, maybe.
The Federal Trade Commission is going after bloggers, celebrities and tall tales in the first revision of its rules for endorsements and product reviews in nearly 30 years.
The new guidelines, which go into effect Dec. 1, are designed to adapt to a new world in which blogs and social media Web sites such as Facebook and Twitter have quickly become go-to destinations for consumers to get an opinion about a product. The last FTC rules revision was in 1980.
An existing FTC rule that states product reviewers must reveal any connection they have with advertisers was extended to bloggers. Companies will often distribute free products to bloggers for their review, and sometimes advertisers offer payment for endorsements. The FTC said that endorsements on blogs appear to be "word of mouth," but that is not always the case – sometimes companies create their own blogs that can give the aura of objectivity.
The new rules also clarify that celebrity endorsers of products must reveal their relationships with advertisers when making endorsements if they are pushing a product on a blog, social network or television talk show.
"The test here is, if the relationship were known between the blogger and the advertiser, would that affect the credibility of the endorsement?" FTC assistant director of advertising practices Richard Cleland told CNN. "That question has to be determined on a case by case basis. What we have produced is a general guidance that says in certain cases receiving a free product is not any different than being paid directly for an endorsement."
The FTC also targeted testimonials in ads that convey atypical results for a product online pay day loans. For instance, many weight loss supplement ads will show people who have used the product and have lost large amounts of weight, with a disclaimer at the bottom that reads "results not typical." Under the new rules, the company must disclose the results that consumers should usually expect.
The existing rules carry a fine as high as $11,000 if product endorsers and reviewers don’t comply.
"This is great for consumers," said Zeus Kerravala, an analyst with Yankee Group. "There’s some doubt about blogs now, because you don’t really know whether they’re unbiased or not."
Kerravala said this could be the beginning of a larger attempt for the government to regulate the Internet. Though he doesn’t believe it will be as tightly regulated as the off-line world, some tougher rules may be coming down the pike.
"We’ve gotten to a point where blog rumors could move stocks," said Kerravala. "There have to be some stricter regulations of the Internet. It’s long overdue."
But enforcement could prove difficult. Cleland said the FTC won’t be hiring new personnel to monitor blogs, creating a "game of whack-a-mole" for regulators, given the numbers involved. As a result, the FTC said it is more likely to go after advertisers rather than bloggers to ensure ad companies are giving product reviewers proper instructions about disclosure compliance.
– CNN’s Eric Kuhn contributed to this report
The U.S. economy will grow more than expected in the third quarter, but unemployment also will continue to increase and "penetrate" the 10% barrier, former Federal Reserve Chairman Alan Greenspan said Sunday.
Greenspan told the ABC program "This Week" that he expected 3% growth in the third quarter, up from the 2.5% he previously predicted. However, he said a "pretty awful" September employment report released Friday showed the jobless rate continued to climb.
A slowing or halt in job losses is different than reversing the rise in unemployment, Greenspan noted, adding that the nation’s unemployment rate — currently 9.8% — is "going to penetrate the 10% barrier before heading down."
That prediction matches previous comments by President Barack Obama and others who say that unemployment is a lagging indicator in an economic recovery.
Obama said Saturday his administration would focus on job creation, and Greenspan said he supported that approach. However, Greenspan said it was too soon to consider another economic stimulus package or other major spending plan.
"We are in a recovery, and I think it would be a mistake to say the September numbers alter that significantly," Greenspan said, adding: "This is what a recovery looks like. … It’s premature to act on this type of information."
The stimulus effect. Greenspan noted that only 40% of the $787 billion in Obama’s first stimulus package has been spent, and he said it was helping create momentum for the economic recovery.
In particular, he cited his prediction of higher-than-expected third quarter growth. "It looks as though it’s going to be 3%, possibly even higher," Greenspan said.
At the same time, Greenspan endorsed some short-term steps to help the unemployment situation, including extending jobless benefits for those out of work for months who face a cut-off.
He said he was particularly concerned at the large number of people out of work for more than six months. "Temporary actions must be taken especially to assuage the angst of a major part of the population," Greenspan said.
On the same program, two senators from opposing parties agreed on a series of necessary steps to help Americans deal with the effects of the recession.
Both Sen. Charles Schumer, D-New York, and Sen. John Cornyn, R-Texas, called for extending unemployment benefits, extending health-care benefits for the unemployed and extending housing credits to help people buy new homes.
Schumer said a bill extending unemployment benefits would reach the full Senate in the coming week and predicted it would pass, a move endorsed by Cornyn.
President Obama has been steadfast in his pledge that he won’t raise taxes on those making less than $250,000. But that doesn’t mean only high-income households will be subject to higher taxes.
An increasing number of influential Democrats and fiscal-policy experts have signaled that lawmakers will have to get a handle on the deficit. And they recommend seriously considering the creation of a value-added tax (VAT) on top of the federal income tax.
That could mean more money out of everyone’s pockets when buying virtually anything — sweaters, school books, furniture, pottery classes, dinners out.
A VAT is tax on consumption similar to a national sales tax. But it’s not just paid at the cash register. It’s levied at every stage of production. So all businesses involved in making a product or performing a service would pay a VAT. And then the end-user — such as the retail customer — ponies up as well.
No one is suggesting raising taxes or creating new ones before the economy stabilizes.
But Paul Volcker, the former chairman of the Federal Reserve who heads President Obama’s tax reform panel, is advocating a little advance planning.
When it comes to getting control of the country’s debt burden, "I think if we can’t do it on the cost side, we’ve got to go on the revenue side. And it’s too early to do it, but it’s not too early to begin wondering," Volcker said Wednesday in an televised interview with PBS’ Charlie Rose. "You’ve got talk about some tax that hits consumption," said Volcker. "Value-added is one."
John Podesta, the head of the liberal think tank Center for American Progress who headed President Obama’s transition team, also raised the issue of a VAT this week. He noted that the only way to stabilize the debt situation is to reduce spending, reduce the growth in health care costs and add new revenue.
"As progressives we need to debate the policy merits and likelihood of enacting a range of options — including designing a small and more progressive value-added tax, changes to the corporate tax code, and taxing-upper income earners beyond reversing the Bush tax cuts," Podesta said in a statement.
Podesta’s organization, meanwhile, said in a report, "Responsible people know that additional revenue has to be part of the mix even if they believe in lower taxes in general. And those who believe that government investments and spending are critical to our economic and social well-being … recognize that tax increases on the wealthiest and corporations are not going to solve the whole problem."
Where things stand now
President Obama has proposed closing corporate tax loopholes and increasing the tax bite on upper-income households by letting most of the 2001 and 2003 tax cuts expire for families making more than $250,000.
He has also proposed making those cuts permanent for everyone else — which would cost federal coffers roughly $2 trillion in foregone tax revenue over 10 years.
Just how hard would it be to lean only on the top 5% of taxpayers to pay for everything the country has to do in the next 10 years?
"You’d have to hit them hard, raising their top marginal rates by as much as 30 percentage points," said Roberton Williams, a senior fellow at the non-partisan Tax Policy Center. In other words, instead of a top income tax rate of 39.6%, it would have to kiss up to 70%.
Rather than such draconian measures, experts say the most effective way to attack annual deficits is through a combination of spending cuts and tax hikes.
In theory, having a VAT might let lawmakers lower personal and corporate income tax rates.
But if the rate of the VAT is set relatively low — say at 5% — and if the rate of government spending continues apace, that might not raise enough revenue to make lower income tax rates a possibility, said Rudolph Penner, a former director of the Congressional Budget Office and now an institute fellow at the Urban Institute, a public policy research group.
"If we vigorously control spending growth or are willing to tolerate a significant, although lower deficit, there would be something left over for tax cuts," Penner said.
Currently, the notion of a VAT is "a non-starter from a political perspective," said William Gale, co-director of the Tax Policy Center, at a Center for American Progress conference this week.
Democrats say it’s regressive, meaning it would hit lower-income people hardest since they tend to spend all of their income on consumption purchases that could be subject to the VAT. Low-tax advocates, such as conservative Republicans, see a VAT — on top of the current tax system — as harmful.
But given the depth of the nation’s fiscal needs, there aren’t many attractive options.
"Tax rates could be raised in the existing system, but that would be extremely inefficient," said Penner in a paper about the VAT. "Tax reform might raise revenues more efficiently, but that is excruciatingly difficult politically."
"That leaves the possibility of a brand new tax, and a VAT is a very likely candidate," he added.
Canada did not follow the U.S. example of financial deregulation that began there in the early 1980s. Ottawa did permit the brokerage and trust sectors to be absorbed by the banks. But the feds maintained strict supervision so Canada is the only major economy in the current crisis in which government has not had to bail out its banks.
By contrast, the United States, epicentre of the latest global crisis, began to dismantle its most critically important regulatory safeguards in 1980. There soon followed the epic savings and loan crisis of that decade.
In the late 1990s, bank lobbyists succeeded in achieving revocation of the FDR-era Glass-Steagall Act, which separated commercial from investment banking. They did this with lavish campaign contributions to key Democrats and Republicans in Congress – assuring lawmakers that they were now more safely spreading risk, when the bankers actually were preparing to accumulate unsustainable amounts of it.
In 2004, George W. Bush’s Securities and Exchange Commission (another FDR creation) decided investment banks, henceforth, should be permitted to regulate themselves. Also, under the so-called Basel II rules that came into effect a few years ago, global banks granted themselves permission to be the sole arbiters of what constituted undue risk.
So, the bomb had been built.
The timer was activated by the "innovation" of derivatives, subprime (junk) mortgages, credit default swaps, collateralized debt obligations and other high-risk instruments. Off-balance sheet repositories for a bank’s dubious assets were such that no additional capital was required as a provision against their going sour. The lax regulatory regime, dating from the Reagan era, neither understood nor tried to regulate the new tricks banks and brokerages were up to.
When the record U.S. housing bubble earlier this decade finally burst in 2006-07, the subprime mortgages and other "toxic waste" on bank balance sheets suddenly had to be written off in the billions of dollars – $41 billion (U.S.) in the case of Swiss banking giant UBS AG alone.
So, Uncle Sam has been obliged to commit an almost unimaginable $9 trillion (U.S.) in taxpayer funds to stabilize America’s troubled major banks. Last fall’s global credit freeze following collapse of brokerage giant Lehman Brothers Holdings Inc. accelerated a U.S. recession that began in December 2007. So far, it has cost about 7.3 million North Americans their jobs.
In financial capitals worldwide, the talk now is how to prevent another crisis, almost certainly more devastating than the last. Now that the largest surviving banks know their institutions are "too big to fail," they have even greater incentive to carelessness – a phenomenon known as "moral hazard."
There is talk of breaking up the biggest banks. After all the forced mergers of weakened banks in the past year, America’s four largest banks now control about 40 per cent of total industry assets, double the portion of 2000.
There is talk of reinstating the separation of commercial and investment banking. Of capping excessive banker pay and "clawing back" bonuses from traders and dealmakers whose investments later go bad.
There is a wish among some for greater "harmonization" of regulatory standards among nations, presumably so that there is no repeat of the contagion of U.S. subprime defaults spreading to Europe and Asia pay day loans.
The Canadian experience suggests those measures are unnecessary. The concentration of Canadian financial assets in a handful of institutions makes the Canadian system easier to supervise, the one saving grace of an oligopoly. Commercial and investment banking happily coexist in Canadian banks, as they do in Europe.
Harmonization would be useful in this era of globalization, giving errant bankers no place to hide, but overcoming differing national sentiments puts that goal out of reach for some years yet. Canadian provinces still resist a national securities regulator.
The essential feature of banking in Canada is that strictly enforced regulation, dating from the creation of the Inspector General of Banks in 1924, remains intact.
Initially, it was welcomed in those uncertain times to reassure depositors and to create a "level playing field" in which hyperaggressive bankers could not force prudent ones into a reckless race for assets. Nothing about that regime has changed since.
America enjoyed a golden age of banking lasting about 50 years from the time of Franklin Roosevelt’s mid-1930s imposition of sweeping bank regulations and their vigorous enforcement. The next five decades were marked by no more financial "panics."
None.
As David Ross writes in proposing means of preventing future financial crises in the current Harvard Magazine, "Private financial markets and institutions have always had trouble managing risk – and especially systemic risk – on their own. The long series of financial crises that punctuated American history up through 1933 testifies to this fact, as does the current crisis, which exploded not coincidentally during a period of aggressive financial innovation and deregulation."
FDR was the best thing to happen to U.S. banking. Those 50 golden-age years were marked by lucrative business in credit cards, 401(k)s (RSPs), mutual funds, adjustable-rate mortgages and ATMs. There were no system-wide panics, whereas the failure of one brokerage, Lehman Brothers Holdings Inc., last September froze credit among banks around the world.
It’s not clear what shape financial reform will take. But what’s needed seems clear, starting with a return to more vigilant government oversight of America’s banks and other financial institutions.
U.S. banks should have to double their cash reserves against losses, to 8 per cent of capital. Their leverage ratios should look more like those of Canadian banks, which lend or invest about $20 for every $1 they have in capital. In the U.S., the ratio is closer to $30 and, in Europe, $40 is not uncommon.
Ace business columnist Joe Nocera of The New York Times last week imagined what Obama ideally would say on genuine reform: "If a bank wants to be so large that it is too big to fail, it can do so – but it will have to put up much more capital than a smaller competitor. If a bank wants to dabble in derivatives, it will have to pay a price in higher capital requirements. If a bank wants to invest in risky assets – ditto.
"Banks hate higher capital requirements because they depress profits. So they’ll have to make a choice: risky assets or lower capital requirements. They won’t be able to do both."
There’s really no alternative to watching bankers like a hawk. It’s our only hope of returning to those uneventful years before the safeguards came tumbling down, and bankers assumed a new role as agents of wealth destruction without historical equal.
dolive@thestar.ca
The number of first-time filers for unemployment insurance jumped last week, according to a government report issued Thursday, with the increase exceeding economists’ forecasts.
There were 551,000 initial jobless claims filed in the week ended Sept. 26, up 17,000 from an upwardly revised 534,000 the previous week, the Labor Department said in a weekly report.
A consensus estimate of economists surveyed by Briefing.com expected 535,000 new claims.
"We’ve been holding in a similar pattern the past few weeks, and this could dash some hopes of a quicker recovery," said Adam York, analyst at Wells Fargo.
Ian Shepherdson of High Frequency Economics wrote in a research note that "a correction was overdue" after three consecutive declines in initial claims.
"Progress is slow," Shepherdson said. "There is still no sign of a near-term stabilization in employment."
The 4-week moving average of initial claims was 548,000, down 6,250 from the previous week’s revised average of 554,250.
Continuing claims: The government said 6,090,000 people filed continuing claims in the week ended Sept. 19, the most recent data available. That was down 70,000 from the preceding week’s ongoing claims.
The 4-week moving average for ongoing claims fell by 39,250 to 6,154,500 from the prior week’s revised average of 6,193,750.
The initial claims number identifies those filing for their first week of unemployment benefits. Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.
The figures do not include those who have moved to state or federal extensions, nor people whose benefits have expired.
State-by-state data: Two states reported a decline in initial claims of more than 1,000 for the week ended Sept payday loans. 19, the most recent data available. Claims in Kansas fell by 1,545, while Wisconsin’s fell by 1,258.
A total of 12 states said that claims increased by more than 1,000. California reported the most new claims at 5,112.
Fewer layoffs: A separate report from outplacement firm Challenger, Gray & Christmas said its data showed stabilization in the job market.
Monthly layoff announcements fell in September to 66,404 job cuts, down 13% from August. That’s the lowest level since March 2008, and the September figure was 30% lower than the same month a year ago, when employers announced 95,094 job cuts.
It was the fourth consecutive month in which job cuts declined from the year-ago level.
Outlook: Thursday’s government report "shows we still have job losses to come this year," said Wells Fargo’s York.
The rest of 2009’s job losses won’t come near the levels seen during mass layoffs in January and February, York said, and initial claims could fall below the 500,000 mark by year’s end.
High Frequency Economics’ Shepherdson wrote that better economic data in the third quarter should boost the job market.
"It would be very surprising not to see claims falling now," he said.
We want to hear about the most outrageous consumer rip offs and price gouging that you’ve come across. E-mail your story to julianne.pepitone@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
Wall Street’s job woes don’t appear to be over just yet.
At this time a year ago, layoffs were rampant at big investment banks and other securities firms. Companies were scrambling to exit some of the businesses that delivered massive profits in prior years but became big problems once the credit markets collapsed.
Since Lehman Brothers filed for bankruptcy last September, the securities industry in New York has lost a little more than 20,000 jobs, according to state employment data. And many leading Wall Street firms subsequently took a hatchet to payrolls around the globe.
Last October, Goldman Sachs (GS, Fortune 500) slashed 10% of its workforce, or approximately 3,360 jobs, as a result of difficult market conditions. Citigroup (C, Fortune 500) grabbed headlines a month later when it announced plans to eliminate more than 50,000 jobs.
While the pace of job cuts has slowed in recent months, many experts think that the number of people working on Wall Street will dwindle even further.
"Many, if not most, financial services firms are restructuring and laying people off, even though it may not be in massive numbers," said Marisa Di Natale, senior economist at research firm Moody’s Economy.com. "I expect that will continue."
In late May, the Independent Budget Office, a non-partisan agency that reviews the annual New York City budget, published a report projecting that an additional 32,400 jobs at the city’s financial firms would lost over the next two years.
The job cuts do make sense. Since most Wall Street firms are not as profitable as they once were, they can’t afford (and probably don’t need) as many employees.
Di Natale added that the threat of sweeping Congressional reforms looming over the financial services industry could lead to even more layoffs.
But despite the grim employment outlook, there have been encouraging signs for those some industry veterans or those looking to break into the business.
Even as recruitment numbers are off from their pre-crisis peaks, Wall Street firms continue to hire freshly minted MBAs in droves, notes Greg Ruf, CEO of MBA Focus, which maintains an online database of business school job seekers used by companies around the world.
"Banks are nervous if they don’t hire enough they will be caught two years from now without having enough people to be involved in major deals," he said.
Higher up in the ranks, hiring continues in such key areas as bond trading, notes John Rogan, a partner and head of the global banking and markets practice at executive search firm Russell Reynolds Associates.
And if the current trend of companies looking to sell stock and make acquisitions continues, Wall Street firms will also need to add more experienced investment bankers.
"Once deal activity really accelerates, people at that level with great experience will be like gold dust," said Rogan.
But even in down markets, companies can usually identify an area to expand, said Richard Staite, a London-based banking analyst with Atlantic Equities.
For example, Goldman Sachs is said to be looking to hire up to 200 staffers for its asset management business, according to a report in the Financial Times reported earlier this week.
"I don’t think you can say there has been any widespread rebound," Staite said. "Companies are simply hiring where they feel they are missing out on current opportunities."
Stocks slipped Tuesday after a surprise drop in consumer confidence countered a better-than-expected housing market report. That added to lingering questions about the strength of an economic recovery.
The Dow Jones industrial average (INDU) lost 47 points, or 0.5%. The S&P 500 (SPX) index lost 2 points, or 0.2%. The Nasdaq composite (COMP) lost 2 points, or 0.2%.
Stocks churned in the early going, before turning lower after the 10 a.m. ET release of the consumer confidence report. By afternoon, stocks were volatile, bouncing across the unchanged line.
"Many people believe that you still need to see the consumer come back for the recovery to be sustainable," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "If consumers aren’t confident, they’re not going to spend."
After sliding last week, stocks bounced back Monday as investors welcomed multi-billion dollar merger news involving Abbott Labs (ABT, Fortune 500) and Xerox (XRX, Fortune 500).
But the advance was short lived, with investors again showing caution after a seven-month rally that has left the leading indexes at nearly one-year highs.
"We continue to wait for the market to slow down," said Scott Armiger, portfolio manager at Christiana Bank & Trust.
Since bottoming at a 12-year low March 9, the S&P 500 has gained just shy of 57% and the Dow has gained around 49%, as of Tuesday’s close. After hitting a six-year low, the Nasdaq has gained nearly 68%.
Bets that the economy is slowly starting to recover — plus the impact of extraordinary amounts of fiscal and monetary stimulus — have fueled the market advance.
Despite pervasive calls for a September selloff, stocks have held on to gains and moved higher this month.
"You don’t know if a September selloff has just been pushed into October or if a big selloff can be avoided altogether," he said.
Economy: Consumer confidence dropped in September, potentially a bad sign ahead of the critical holiday retail sales period. The Conference Board said its consumer confidence index fell to 53.1 from 54.5 in August. Economists surveyed by Briefing.com were expecting the index to rise to 57.
The pace of falling home prices continued to slow, according to a report released before the markets opened. The Case-Shiller 20-city home price index rose 1.6% in July from June, more than triple what economists surveyed by Briefing.com were expecting.
Prices dropped 13.3% in July versus a year ago, a decline that was slower than the drop of 14.2% economists were expecting. Prices fell 15.4% year-over-year in June.
Company news: CIT Group (CIT, Fortune 500), fighting to pay off debt and avoid bankruptcy, is reportedly negotiating a new credit facility that could total $10 billion. Shares of the lender jumped 31%. Earlier, reports said that hedge fund manager John Paulson was considering merging CIT with failed mortgage lender IndyMac.
Dell unveiled its newest high-end, super-thin personal computer late Monday. Called the Latitude Z, the 4.5-pound PC will retail for $1,999. Dell (DELL, Fortune 500) shares fell 3% Tuesday.
JPMorgan Chase (JPM, Fortune 500) said it is shuffling some of the management responsibilities of its successful investment banking and asset management units. Shares were little changed.
Drugstore chain Walgreen (WAG, Fortune 500) reported weaker quarterly earnings and higher quarterly revenue, both of which topped analysts’ estimates. Shares rose 9%.
Sequenom (SQNM)’s board said it has removed most of its management team, including the CEO, following a scandal involving mishandling of research and results on its prenatal Down syndrome test. Shares of the genetic analysis product developer fell 39% in unusually active NYSE trading.
Market breadth was negative. On the New York Stock Exchange, losers narrowly edged winners on volume of 1.18 billion shares. On the Nasdaq, decliners topped advancers by five to four on volume of 2.11 billion shares.
One-year later: Tuesday is the first anniversary of the Dow’s biggest one-day point loss of all time, when the average plummeted 777.68 points and the broad market knocked out $1.2 trillion in value.
The plunge followed the House of Representatives’s decision to reject the government’s then $700 billion bank bailout plan. With banks around the globe teetering on the brink of collapse and credit nearly frozen, the decision sparked a panic that battered stocks in every sector.
The crash followed a brutal two-week roller-coaster, triggered by the near-meltdown of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and the collapse of Lehman Brothers.
World markets: Global markets were mixed. In Europe, London’s FTSE 100 and France’s CAC 40 were little changed, while Germany’s DAX slipped. Asian markets rallied, with the Japanese Nikkei rising 0.9%.
Currency and commodities: The dollar rose versus the yen and euro, pushing higher after repeatedly hitting one-year lows against a basket of currencies over the last few weeks.
U.S. light crude oil for October delivery fell 13 cents to settle at $66.71 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose 30 cents to settle at $994.40 an ounce. Gold closed at a record high of $1,020.20 two weeks ago.
Bonds: Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.29% from 3.28% late Monday. Treasury prices and yields move in opposite directions.
Powered by WordPress -- XHTML 1.0