iamverystupid said:
Oh?
Read about Enron and you'll realise that many of the big investment banks don't play by the rules. The financial services sectors is regulated, but whether the firms themselves adhere to these regulations is another issue.
Well I wasn't saying just because finance firms are regulated, they are perfect. If you're involved in the markets on a regular basis, you'll notice instances of market manipulation and 'shades' of insider trading..... and while they are somewhat 'bad' in the eyes of the unbiased law, you can't help but accept the fact that that's how the system works. The system is hardly a fair one. For every winner there's someone getting snuffed. But that's the premise of capitalism and free markets. The bigshot criminals will always be caught, because their actions cannot be sustained forever, but sometimes in small instances you'll find even those at the very top are in on the manipulation too. The big players in the market are the ones who make it. and as a trader you should be making most of it.
Indeed sometimes the regulation and red tape will aid in the corruption process. And you will usually see with the big corporate collapses, they are results of 'creative accounting' and bought auditors
.
In terms of comparison with the IT sector, the investment community is facing conditions not seen before. The sheer amount of liquidity floating around is driving up prices in pretty much every asset class. If IT was a bubble, then we're similarly in a credit bubble right now.
Easy credit IS the flavour of the month.
My point about the comparison with IT is - IB's, brokers, funds and such are the 'facilitators' of booms and busts so to speak. the investment firms were the ones funneling the transaction from investor to IT company, and noone was complaining about it because everyone was rolling in money. It's like that with every cycle.
However, with your point about the 'credit bubble' at the moment, I think that is more to do with the whole economy than just with banking. like I said, financial jobs are not likely to bust, like in IT, because they are lean, efficient and stable. They are the middle-men and most IB jobs are related to personal performance. and most importantly they aren't evolving in technology every 3 months like IT does. The advent of the internet caused evolution of businesses and a booming IT industry. Too much money slushing in IT caused it to bust, which is natural.
Now domestically everyone is spending at record highs, and yes people are getting into debt. whilst world wide, emerging economies in china, india, americas are continuing to fuel world demand. This isn't a credit bubble though. It's more of a saving/investment issue faced by most western economies. Whilst credit is not good debt wise, it stirs up the economy and growth. one would think as the economy grows, standard of living increases, so peoples capacity to pay off debt is better.
The economists learn from the cyclical crashes of past. yes we are booming at the moment, but it's no comparison to the tech boom. The rises in world markets now are scarily looking like pre 87 crash, but the difference is earnings ratios are much lower and inflation controlled - it looks like we're growing sustainably. Economies are now more cautious, controlling economic activity through careful policies, interest rates and monetary policy - we haven't seen a recession since the early 90's.
cheers.
