Friday, October 01, 2010

Wall Street With Funds With Lesser Funds

Yes it's 21 Weeks And 73 Billion Redeemed From Equity Funds and even IBD has started featuring the issue (although on a much watered down version) Stock Fund Outflow Hits $16.53 Billion

  • Posted 09/29/2010 05:44 PM ET

    Investors pulled a net $16.53 billion from stock funds in August as the market fell.

    It was the most since May's $24.76 billion outflow and was up from July's $10.45 billion outflow, according to the Investment Company Institute.

    Indications were that stock fund outflow slowed slightly this month.

    August's outflow was the fourth straight monthly net withdrawal. For the year to date, stock funds gave back $18.19 billion vs. $14.48 billion of inflow in the year-earlier period...

September was a good month, no? Look at CNBC article header: Can Rally Continue After Best September Since 1939?

Best September since 1993 and the stock fund outflow continued!

Yeah.. the inquiry mind wants to know what would be of 'stock funds with much less funds'? And more so, a market with stock funds that has less funds?

How about this from Meredith Whitney who is making a massive prediction that 80,000 layoffs could be seen in Wall Street! ( do play the video)

On the Hiring Freezes and Layoffs Begin on Wall Street

The money wasn't flowing as abundantly through Wall Street this summer. Big banks are beginning to slow their hiring and reduce their workforces. And these aren't entirely back- or mid-office jobs, as front-office employees will also be affected. This indicates pessimism on the part of the financial industry, which is likely bad news for the broader economy as well.
Earlier this week, we learned that Morgan Stanley has implemented a hiring freeze on investment banking jobs through the end of 2010. Trading and underwriting have been slow and aren't expected to pick up much in the near-term. Usually, that means layoffs aren't far off.

Indeed, reports also indicate that Bank of America has begun to shed jobs from its capital markets group for the same reason.

A Bloomberg article by Michael J. Moore on the Morgan Stanley freeze says:

  • Companies including Barclays Capital and Credit Suisse Group AG also have started reducing staff in Europe. Securities firms around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow, bank analyst Meredith Whitney of Meredith Whitney Advisory Group LLC said in a report dated Aug. 31.

According to a source who spoke with John Carney of CNBC, U.S. fixed income groups will be severely affected. The source describes volume down across the board, predicting a "bloodbath." Part of the problem is new financial regulation, says the source:

  • "It's a one-two blow for fixed income. The derivatives are being commoditized and put on exchanges. Swoosh. Now you don't need half the people you employ to trade and track those. And volume on corporates and agency paper is way down."

Usually when Wall Street firms begin laying off workers, a full-fledged firing wave begins. If volume is down for a few, then it's down for everyone. And for layoffs to ensue, they either overestimated the speed of the recovery or see a double dip. Either way, this is probably bad news for Main Street, since Wall Street firing tends to be a leading indicator for the rest of the labor market.

----- (LOL! Lot's of source too! :P ) -------

And then we have DB Shaw and BoA: DE Shaw, Bank of America (BAC) Layoffs Foreshadow Harsh New Reality for Wall Street

  • Bank of America, according to a person briefed on the decision this morning, is already planning to eliminate up to 30 proprietary trading jobs, or almost one-third of its proprietary trading division. JPMorgan has revealed plans to move proprietary traders into its Asset Management division in order to salvage some of their prop trading desks, reported the New York Times on Monday. Goldman Sachs will reportedly dissolve or spin off its proprietary trading teams entirely. Credit Suisse recently forked $425 million for a stake in Swiss bank York Capital (a deal that is compliant with the Volcker Rule, which allows banks to own hedge fund managers while limiting the investment of the bank capital in funds itself). Despite strategies to deal with the impending regulations, these firms have already seen an exodus of talent to private equity firms and hedge funds, such as Blackstone. But many think that when the dust settles, not every cute puppy will be able to find a new home.
    Following $7 billion in redemptions in the past few months, esteemed quant hedge fund DE Shaw is cutting 10% of its work force, which, in this case, represents 150 of the brightest math geniuses around. Many have purported that job cuts in the financial services industry would be mainly limited to secretaries and back room staff, but these across the board cuts include partners and portfolio managers as part of a long term strategic review by the company. The decision was clearly not taken lightly, which makes it that much more telling. Perhaps (gasp!) the opportunities for quantitative exploitation of our financial markets are reaching a head, or is becoming saturated to the point that further expansion in that space is darn near impossible.Although slightly off topic, it is interesting to consider the possible implications of DE Shaw’s massive redemptions, per ZeroHedge. Given the rally in equities over the past few months, it is also fair to presume many of DE Shaw’s losing positions were bearish ones, and the unwinding of those positions contributed, at least in part, to the acceleration of the rally. Many market participants have been left wondering, "who continues to buy this stuff?" Now, we have an example of at least on type of example. Hedge Fund titans like David Tepper of Appaloosa and Bill Gross are mindful that you must always be mindful of the Fed, and the implications of its actions, when developing a core investment strategy, but the recent the recent ramp up in equities (to the detriment of quant funds like DE Shaw) shows the dangers in setting such a precedent for market manipulation by our great central bank. It seems that is the current environment, the only way to deliver consistent returns is by essentially front-running the Fed.

The DE Shaw is the most interesting.

7 Billion Redeemptions and 10 percent layoffs ( they laid off their math geniuses!)!!!

Ah.. perhaps they (DE Shaw) deserved it for doing what they did - do see this article A poster child for treating investors poorly?

On NY Times Blog: Wall Street's Layoff Problem Is Spreading

  • And Morgan Stanley is taking a related approach: it’s asking bosses to hold off on new hires unless the position absolutely needs to be filled.
    As Nelson D. Schwartz pointed out in The New York Times last week:
    After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010. …
    While the numbers will not be known until after the third quarter ends and financial companies begin reporting earnings in October, the pace of trading this summer was slow even by normal summer standards. Trading in shares listed on the New York Stock Exchange was down by 11 percent in July from 2009 levels, and August volume was off nearly 30 percent.


Note the very last sentence: trading in shares listed on the New York Stock Exchange was down by 11 percent in July from 2009 levels, and August volume was off nearly 30 percent.


bonny b said...

Great post Moo. Like eye-wash for investors who have been fogged by recent gains. Investors please note. Very much appreciated. Fish on the table!!

investbullbear said...

The Indian Stock Market (Sensex), though higher, is also experiencing huge withdrawals by individual investors.

"The last time they were at 20,000 - sometime in December 2007 - individual investors were desperate to get in. Mutual funds were drawing net positive inflows of around Rs 3,000-5,000 crores from individual investors.

Today, at 20,000, there are net outflows everyday and the domestic financial institutions have net sell figures of Rs 3,000-5,000 crores on the negative side, indicating heavy withdrawals."