Financial Crisis Just Doesn’t Seem To End

It’s a nightmare to keep in touch with the news nowadays, with an endless flow of negative news about economy. Whether you watch the news on TV, listen to the news from the radio or just read the newspaper, you will experience the same feelings of fear and doubt. Companies are failing like nobody’s business and no one trusts what officials of companies say anymore, with good justification. It’s without doubt that companies continue to put on a strong front and ends it only when they can hide it no longer.

Take the case of Lehman Brothers for example. Just shortly before they announced the bankruptcy, there were like many people who bought a mini Bond kind of deposit that promises around 5% of interest. At that time, my friend told me the salesman was quoted as saying “What’s the chance that Lehman will go bankrupt?”. On hearing this, people started thinking that banks couldn’t fail and that the interest rate was too attractive to let go. Now, fast forward to the present. Ask that question again and the answer is an affirmative 100%.

Anyway, these mini bonds are junior debts, so they probably can’t even get a cent back from their investment. For those who don’t understand what junior debts are, I will give a short illustration. When companies are liquidated, there are certain order of who gets the remaining money from a company. Generally, if there are no special terms such as asset-linked bonds, the order to pay is senior debtholder, junior debtholders, preferred shareholders and common stockholders. Although junior debtholders is supposed to be 2nd in the hierarchy, there can exist a large of senior debts and do note that Lehman doesn’t have much net assets to be liquidated in the first place.

The point of me raising this case is simply because I really have to applaud at the efforts of companies in hiding their problems. I don’t know if it’s because of red tape due to bureaucracy, the unethical nature of people or just a last ditch effort to save the companies. The current economy has shown us that nothing is infallible and it’s not like history hasn’t shown us before, as evidence from the collapse of Barings bank, one of the oldest banks in that time. It’s even more unbelievable that the bank claims one person caused the collapse.

While I have always believed that banks can collapse anytime, experiencing it first hand is something totally different, not to mention the fact that it had to happen when I’m about to graduate. Banking & Finance graduates seem to be one of the hardest hit of all, with many of the good career opportunities we see last year becoming obsolete this year. As of now, the common greeting among my friends is “Hi Mr Jobless-To-Be”. Of course, that’s just an exaggeration, but the hiring situation for banks is really bad.

The chances of me getting into a position I want is free-falling at a faster pace than if I were to jump down from a plane. Of course, I do believe in being optimistic, so even though the banks have freezed or slowed down their hiring, I believe there are still good jobs around and we should still continue submitting our resumes. However, it’s probably a very good time for people to start thinking about their “What-ifs”. I have thought of mine, how about you?