Wednesday, September 17, 2008

The Shock & After-Shocks

It was some Saturday for the financial markets. Three major shocks in one day, Merill Lynch being taken over by Bank of America, Lehmann Brothers filing for bankruptcy and AIG suffering huge losses. AIG was rescued by the money pumped in by the Fed which for all practical purposes has taken over its control. And all these after the recent collapse of Bear Sterns, Freddie Mac and Fannie Mae. Citigroup has had its value eroded by a large extent. All of these companies seemingly the victims of the sub-prime lending crisis in the USA. The recent collapses come just as the world was on a recovery path from the crude price shock.
During my B-school days, most of the people had come with dreams of becoming an investment banker after completing their MBA. Being placed in Merill Lynch or Lehmann Brothers would have been a dream come true for most people. These investment banks had also built up a reputation of taking the "toppers" only which implied solid acads and excellent communication skills. As time went by people became aware of the other profiles available and moved on to other profiles also. But still being an investment banker was the job.
When I was in second year the sub prime crisis had started taking toll with fears of the oncoming global recession whch would lead to lower packages. However these fears came out to be largely unfounded and the placement figures reached new heights. However six months down the line, it seems that those fears are coming true. With even the big banks collapsing and being taken over, there have been huge job cuts. The finacial markets are down and this may lead to the smaller firms also shutting down. Cost Cutting and downsizing has become the buzzwords across all the sectors. Reports are coming daily of companies cutting jobs or being taken over.
And where does this leave the B-school jobs. During my two year stay at Planet-I, I never worried about not getting a job. And in fact got the exact kind of profile that I had been looking for. But given the current situation, this may not be the case now onwards. The market has to absorb the people who had their jobs cut and the batches passing out from the B-schools. And so the competition would be more while the jobs are getting reduced. The salary figures and packages are expected to go down and new profiles will have to be explored. And quite a few compromises would have to be made.
Situation definetely looks grim, with more and more rumors circulating (I was chatting with a friend who told me that he had heard from some knowledeable person that ICICI was about to go bankrupt due to its dealings with Lehmann). However it is not that bad speacially in India. The growth rat would be lower but still healthy and with the reduction in crude prices, inflation would also be coming under control. And quite a few people would be coming back to India, maybe a reverse brain drain will be take place.
All I can say is lets keep the fingers crossed and hope for the best.
P.S. A friend's post on similar lines is here

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