It’s been a terrible week for the whole financial industry. Lehman Brothers collapsed; Merrill Lynch is about to jump from the cliff. As Fed is settling issues with the Mortgage Lenders 'Fannie Mae' and 'Freddie Mac'; they are about to face the worst month ahead, thinking about WHO is next?? Goldman Sachs and Morgan Stanley are the only Wall Street survivors. History shows that the countries like UK and US have been thru the cycles of economic upheavals, weathered the scars of World Wars and all kinds of manmade disasters. They have pioneered the calamities and experienced a phenomenal growth. They have enough experience and guts to wear Scars on their chests. I am sure they will sail thru.
If I can make this statement, “ US Sub-prime crisis is the first phenomenon which has engulfed not only the originating countries but the whole world ”. Don’t be surprised if there are job cuts in Lehman Brothers Mumbai. Off-shoring has given edge to all FII and foreign financial solution providers. But their business model is based on Hit-N-Run strategy. Let the crisis hit and they will run overnight. This sentiment is quiet evident from ever volatile Sensex and Nifty. This crisis has come knocking our doors with many of us working directly or indirectly in financial domain.
During my London visit, I have experienced the uncertainty looming around ABN-AMRO employees during ABN-RBS M&A. I have seen people Crying-N-Crashing over the pint of beer. I have seen Northern Rock going bust and people queuing outside NR’s ATM to withdraw there hard earned money. At the same time I have spent many Friday evenings sitting in a pub right in front of Lehman Brother’s twin tower building, having a pint in hand and imagining working for LB’s. It is impossible to digest that a bank having a 150 years history going in tatters like that. Over last few years, as a novice, trying to understand the financial markets and now working for a financial institution, I have all my sympathies with all those who might loose there jobs as an aftereffect.
While bombarding the terrains of Bagdad and Kandahar, Uncle Sam easily overlooked the spread and use of Financial Weapons of Mass Destruction (FWMDs) in his own backyard. This so called financial engineering is no less than rocket science. Financial scientists have created these dynamites in the form of complex financial instruments. Dynamite at least kills once and for all; these FWMD’s are going to rob minds and souls over next few days.
Being the first Indian generation to face an economic crisis of this length and breadth, we have a lot to learn from these stories. We have to prepare ourselves mentally as well as financially to tackle the crisis of this scale. Being an emerging superpower, we have to go thru the travails. One should earn during booming economy and learn during economic depression. We are kids in the financial domain, we have to build our competency and may be, overrun these foreign giants sometime in future. After all an Indian is running the City Group.
Financial market provides a channel for distribution of money from lenders to borrowers. Money just keeps on floating between parties involved in a trade. It is some bodies’ loss that feeds some bodies gain. Money keeps on exchanging pockets. Unlike in manufacturing industries, where there is a generation of asset, these are the real breeding grounds for Money. The economies that are build on manufacturing boom; will surely weather this financial crisis. Lord Krishna has described the importance of ‘Agriculture’ in 3rd Verse of The Geeta. “Nobody can survive without food, hence everybody should contribute to farming. Hard work keeps your body fit, mind agile and sole at peace. Working out in the field builds Observation skill, Perseverance, logical interpretation and future vision. Harvesting is an astounding difference between the Man and an Animal.” I never realized the meaning of this verse, until Now!!
Credit Suisse ( 16 September 2008)