Paul Krugman says pre-bubble (ie pre-Reagan), the finance industry was only 4% of GDP. Right before the burst, it was 8%. Now I don’t think we can get back to the leverage level. This plus the fact that some financial innovations can stick, so I am guessing it will be about 5% when everything stabilizes. Still, this is a 40% shrink of the industry. Pretty big deal and scary. What do you think?
Of course GDP would be shrinking big time itself.
needhelp Wrote: ------------------------------------------------------- > Of course GDP would be shrinking big time itself. But this is a systematic risk not an industry specific risk 
And how is this a bad thing? People will be forced into real jobs and also reduce income disparity.
Not a bad thing. That just mean many of us will have to switch industry. Unfortunately, this won’t be easy for the senior folks among us.
Mohamed El-Erian had a great article on this recently, answer is it will shrink a lot: http://www.pimco.com/LeftNav/Viewpoints/2009/El-Erian+Financial+Times+March+To+Do+List+Is+Getting+Longer.htm
As a % weight of the S&P 500 it went from 20%+ at the peak to 8%. Ouch! L’ville grad represent.
I am not a big proponent of forecasting so I am not going to pretend to know the future. Take a step back and think about it pragmatically. How many people have you encountered that added little or no value to the organization. How many people did you seriously respect for their knowledge and professionalism? Its a great opportunity to weed out cheats, idiots, or those unfortunate to be both (tho it might be hard to be a dumb cheat because you’re probably unsuccessful at it). There will always be a need for people with the know-how. For once I may agree in some respect to louisvillegrad. Cut some of the fat and focus on producing something.
I agree. We cut a few folks from our staff and we don’t miss them very much. In fact we are running more efficiently than ever and the workplace in more enjoyable/dynamic as a result. Layoffs are an efficient way to allocate human capital and our ability to shed jobs quickly will help get us out of this funk sooner rather than later. This is true of all industries, not just finance.
I’m sure finance consulting could and would be expanded to include smaller and smaller businesses. We don’t have to change industries, just gears, as companies will have to become more and more efficient to compete with overseas companies. Just a thought.
JustPass Wrote: ------------------------------------------------------- > I agree. We cut a few folks from our staff and we > don’t miss them very much. In fact we are running > more efficiently than ever and the workplace in > more enjoyable/dynamic as a result. > > Layoffs are an efficient way to allocate human > capital and our ability to shed jobs quickly will > help get us out of this funk sooner rather than > later. > > This is true of all industries, not just finance. Human capital. Stealing a buzzword from the LIII books are you??? Pop quiz hot shot… what should an investor do if their human capital is equity-like… GOOOOO! just-kidding 
My GS structurer friend just resigned. Is structurer basically a hgih class salesperson of toxic debts???
ymc Wrote: ------------------------------------------------------- > Still, this is a 40% shrink of the industry. > Pretty big deal and scary. Personally I like it, we need a good house cleaning. The shutdown of the subprime securitization unit I used to work resulted 10 lost jobs, 8 people without a college education, 1 CFA candidate and 1 MBAer. The 8 will go find work at The Gap and the CFA and MBAer will find new finance jobs. You gotta remember the “finance industry” includes tons of low level jobs we don’t normally think about. I guess it depends if the cuts hit “finance” or high-finance studs like you and me!