Horrible

Horrible. The word used to describe the job losses in January. I had a friend tell me that the economic crisis would not have as deep an impact on Canada. Unfortunately that is not the case. On a per capita basis, these numbers are very bad.

Canada’s job losses in January surpassed anything seen during the previous economic downturns in the 1980s and 1990s, Statistics Canada said Friday.

With the economy staggering in recession, Canada’s unemployment rate shot up by 0.6 percentage points in January to 7.2 per cent as 129,000 jobs were lost. Almost all of the job losses were in full-time work.

Since October, the battered Canadian economy has lost 213,000 jobs.

Reaction of world financial markets to the shockingly poor jobs report was negative. The Canadian dollar traded down 1.02 cents at 80.21 cents US.

The job losses far exceeded the drop of 40,000 that economists had been projecting. “Horrible” and “shockingly poor” were some of the words they used in reaction to the January jobless figures.

Via.

The Great Depression 2009

The Canadian economy is forecast to contract 0.8 percent in 2009. The budget put forward yesterday commits the government to substantial deficits for the next four years. $20 billion cut to personal income taxes. Home renovation tax credit. An additional $50 billion to the Insured Mortgage Purchase Program. $12 billion in new infrastructure spending.

All this for a 0.8 percent contraction in 2009? Our political leaders are still only hinting at the severity of the current crisis

Canada may well do better than most other advanced economies during this financial crisis. But just how bad will it get?

We can summarize the current economic mess simply: greed plus incompetence plus an irrational belief in market efficiency equals disaster.

A helpful article to gain context behind this simple statement can be found in this New York Times article “The End of the Financial World as We Know It”.

Everyone seems to be guessing at strategies and outcomes to contain this mess. And regardless of all the stimulus plans by governments, 2009 will be a very, very tough year in terms of economic pain.

What lies ahead are some very painful debt liquidations. The U.S. economy will have to write down capital by almost one and a half times GDP — worse than the Great Depression.

The recovery will take time. At least a year and perhaps longer.

There are some reasons to be optimistic. With the market basically at half price, a dollar is a more powerful instrument. Assuming, of course, that you have a dollar to invest. Investment dollars are weak dollars in over-priced markets. They are strong dollars in cheap markets.

I find it hard to comprehend the lack of competence of the U.S. administration under George Bush and the deplorable conduct of the leaders of the major financial services companies. Although the next few years will be difficult for Canadians, this crisis will serve as a reminder to think about real wealth.

John Thain and Hot Water

I had posted about the self-centred leadership style of John Thain here. Looks like his latest antics to get some undeserved bonuses out the door before the new owners moved in may have backfired:

NEW YORK (Reuters) – New York’s attorney general issued a subpoena to former Merrill Lynch Chief Executive John Thain on Tuesday in a probe into bonuses paid to the firm’s employees just days before its takeover by Bank of America Corp.

“The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation,” Attorney General Andrew Cuomo said in a statement.

Bank of America spokesman Scott Silvestri declined to comment.

Cuomo said his office issued a subpoena seeking testimony from Thain, who was ousted from Bank of America on January 22. Also subpoenaed was Bank of America Chief Administrative Officer J. Steele Alphin, Cuomo said.

Cuomo said his office is conducting its ongoing inquiry into executive compensation practices at companies taking part in the $700 billion financial bailout fund together with the special inspector general of the federal aid program.

Via.

John Thain’s $87,000 Rug

News of another layoff of sorts hit the streets today.

Former Merrill Lynch CEO John Thain resigned from Bank of America. John was good enough to ensure that Merrill moved up its yearend bonuses, paying them just before the Bank of America had completed its acquisition of Merrill.

Bank of America gave no reason for Thain’s departure. The company issued a terse statement: “Ken Lewis flew to New York today to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign.”

Interestingly enough, the bonuses were paid out just as the company was getting ready to report a $15.45 billion fourth-quarter loss. The U.S. Government provided bailout money to both Merrill and BoA.

To get a flavor of the quality of leadership in large financial services organizations in the United States — or perhaps John Thain was just an exception — consider the following brilliant act of financial management during tough times:

In early 2008, just as Merrill Lynch CEO John Thain was preparing to slash expenses, cut thousands of jobs and exit businesses to fix the ailing securities firm, he was also spending company money on himself, senior people at the firm say.

According to documents reviewed by The Daily Beast, Thain spent $1.22 million of company money to refurbish his office at Merrill Lynch headquarters in lower Manhattan. The biggest piece of the spending spree: $800,000 to hire famed celebrity designer Michael Smith…

The other big ticket items Thain purchased include: $87,000 for an area rug in Thain’s conference room and another area rug for $44,000; a “mahogany pedestal table” for $25,000; a “19th Century Credenza” in Thain’s office for $68,000; a sofa for $15,000; four pairs of curtains for $28,000; a pair of guest chairs for $87,000; a “George IV Desk” for $18,000; six wall sconces for $2,700; six chairs in his private dining room for $37,000; a mirror in his private dining room for $5,000; a chandelier in the private dining room for $13,000; fabric for a “Roman Shade” for $11,000; a “custom coffee table” for $16,000; something called a “commode on legs” for $35,000; a “Regency Chairs” for $24,000; “40 yards of fabric for wall panels,” for $5,000 and a “parchment waste can” for $1,400.

Via.

I wonder if the extreme makeover of his office and the accelerated bonus payout had anything to do with his sudden departure?

Well. At least he didn’t leave poor. In 2007, John Thain made the news as the highest paid CEO in the S&P 500. His income that year? A mere $83.1 million.

Steve Jobs’ Commencement Address

I had posted a few years back on Steve Jobs’ commencement address at Stanford. Although the words on the page are powerful, I found the video more engaging. Takes about 15 minutes. And it provides some insight into this man’s journey in life.


Harry Markopolos

Slideshare has the 2005 SEC submission authored by Harry Markopolos. An absolutely fascinating read. Markopolos, a securities analyst, once worked for a competitor of Madoff. He could not figure out mathematically how Madoff was generating such levels of return. And he came to two major conclusions:

Unlikely: insider trading.

Highly likely: Madoff Investment Securities was the world’s largest Ponzi scheme.

His lengthy memo, available at Slideshare, offers a compelling example of the corruption taking place within the financial services industry in the United States. This op-ed piece in the New York Times provides more context.

Where on earth were the regulators during all of this nonsense?

Best of 2008 Lists

If you want to find a particular best of 2008 list then start here. Lots of opportunity to spend some quality time with your browser.

Some interesting lists about business:

21 Dumbest Moments in Business

Biggest Ripoffs

50 Best Business Blogs

Best Global Brands

10 Best and Worst Stocks

10 Worst Employees

Top 10 Layoff Sites

Top 10 Worst Biz Deals

Top 10 Financials Crises

Top 10 Best Biz Deals

Top 10 Marketing Blunders

10 Worst Corporations

Best Ad Campaign in 2008

Looking back in 2008, there were a number of highly successful ad campaigns. And the one that hit with the most media publicity was the $300 million Microsoft ad campaign featuring Jerry Seinfeld and Bill Gates.

Lots of buzz for that ad campaign. Some might even say an unprecedented campaign. Although not without a few side effects.

msad