Tuesday, July 14, 2009

Nobrainer on why banking and finance sector was set to crash

A long time ago I warned many people who wanted to read banking and finance. Many of them had big dreams of becoming a banker. Friends, acquaintances and everyone else enrolled in such courses (particularly those in private institutions like SIM and some from local universities like SMU). Many called me a party-pooper, nay-sayer, pessimist, sour-grapes... blahblah

At that point of time, it seemed to be a wise choice for them, now I presume many are looking for jobs in this particular sector while those waiting to graduate from these courses are worried. Their worries are not unfounded, with unpromising outlook for the global economy due to weakening demands around the world (which leads to more unemployment and the vicious poverty cycle, well you get the drift), H1N1 and civil unrest worldwide.

Why did I manage to foresee these? I am no genius, perhaps even less smart than many of you who happen to chance upon this article. I can assure you that it is not rocket science to people who have studied basic econs - of which the theories revolve around the concept of demand and supply. Allow me to elaborate further:

Banking and finance do not create value, they merely shift assets and funds around the world in anticipation of rises and falls in various investment products. Simply put, I view them as non-essential, secondary industries. What creates value then? Everything else which includes engineering, manufacturing, marketing, IT, publishing. Again I think you get the drift. Do we need so many "bankers" around? Without engineering, IT, marketing, agriculture etc would there even be a need for banking personnel? Would there even be growth? And if there was, how long could it sustain?

One reason why markets crash is when currencies, stocks are bloated and over-valued when they are in fact worth much less. This is what speculation does and this is what bankers (the big players like George Soros) do best. On the contrary, under-valuation does not produce a similar effect. Greed sends the average man on the street like lambs to the slaughter.


Irresponsibility in the financial sector

Job titles are grossly overhyped, exaggerated and ridiculously coined. These titles were created to give false hopes to employees. Some of these "jobs" are not even regular jobs with basic pay. They are sometimes based only on commission (which of course depends on performance of the employee). That said, the more eloquent, presentable and good-looking ones get more deals and stay on while many eventually leave the company. This is still a pragmatic world no matter how you sugar-coat the pessimistic situation. Governments around the world are doing little (or rather, nothing) to change the situation (and in my opinion, Singapore is likely to be on top of this list looking at job openings on jobscentral and jobsdb).

MLM companies address their agents as business associates, managers and developers. While insurance companies call their agents financial consultants and investment managers. Not to be outdone, banks began giving their employees flashy titles like business development executives, consultants and VPs. Many of these new graduates proudly declared that they were now "bankers". The new generation of bankers no longer draw fat paychecks, sit in limousines and jet-set around the world to mingle with multi millionaires and billionaires. These "bankers" cold-call prospective customers and pester blue collar employees in bus and MRT stations.

While in the 90s the word "executive" meant employees or even professionals who had worked in the field for more than 5 years, this title currently holds little to no value (perhaps even considered as a derogatory term) even for the most underperforming sales-person.

To sum it up, the finance infrastructure simply cannot support such a large throng of new graduates and these people end up doing jobs that have little to no relation on what they have learnt in school. Only those who hailed from prestigious universities and some lucky ones from local universities will be able to move up the career ladder, given the meritocracy (or rather elitist) mindset of Singaporean employers.

In fact I think this was a deliberate effort by the higher echelons in Singapore.

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