Dec 23, 2008|
Forex defies Wall Street gloom
Alternative routes to limiting layoffs
The biggest financial crisis since the Great Depression has spurned several layoffs across industries around the world with the developed nations facing the maximum heat. But in an effort to minimize layoffs and still rationalize costs at the same time, corporate in the US have been coming out with various initiatives such as four-day workweeks, unpaid vacations, wage freezes, pension cuts and flexible work schedules. In fact, as reported in the International Herald Tribune (IHT), many of the employees are volunteering for pay cuts, it being a much preferred option than being asked to leave. Besides, the pay cuts result in savings, which in turn could prevent further layoffs. Interestingly, the rationale behind these strategies is to have the required workforce at hand should the economy suddenly improve just as it had deteriorated so rapidly in October. The idea is to not cut too much. And corporates are being careful about hiring and firing, choosing to keep the productive workers on the payrolls.
As highlighted in the IHT, the list of companies which are pruning labour costs without resorting to layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (plans to save US$1 m with a week of unpaid furlough for 500 workers).
Currency traders are sitting pretty
While bankers, investment bankers and people of their ilk are struggling to hold on to their jobs, currency traders are having it relatively easy. As reported on Bloomberg, while bonuses, which account for the bulk of annual pay for traders and investment bankers, will fall an average 45% this year, currency traders will see declines of about 15% from 2007; a huge gap indeed. With the significant volatility in currencies, foreign-exchange markets have been witnessing robust growth.
Fathom some statistics on Bloomberg. Forex trading revenue at US commercial banks rose 66% in the second quarter from a year earlier. Global heads of foreign exchange trading will receive average bonuses of US$ 3.5 m to US$ 4.5 m, down 10% from last year. Not only that, foreign-exchange contracts traded at the CME Group Inc., the world’s largest futures market, surged in September by 32% from a year earlier, to a notional value of US$ 111 bn. What’s more, Deutsche Bank and UBS AG, the world’s two largest currency traders, posted three consecutive quarters of record revenue from foreign exchange. Therefore, with the reputation of Wall Street reduced to tatters, it is hardly surprising that foreign-exchange trading was the only area that got away unblemished. And as the volatility is expected to continue, the scenario for the forex markets and traders only appears brighter.
The global auto industry is finding itself well and truly down in the dumps. While the American ‘Big 3’ is banking on the support of the US government to bail them out, Japanese carmakers, which are the most efficient in the world, are also feeling the pinch of the global meltdown. The Japanese heavyweight Toyota, which is close in the race with the American giant General Motors, to be the world’s largest manufacturer of vehicles, is set to lose money in its core auto making business for the first time in 70 years. But unlike General Motors, which is struggling to stay alive, Toyota is expected to weather the storm better given the US$ 18.5 bn that it has in cash with very little debt. However, the scenario in the Japanese auto industry is more or less a replica of what is happening in the US namely lowering of earnings forecasts, cut in production and laying off of staff. Toyota’s peer Honda, which is Japan’s second largest car maker also reduced its profit forecast by about two thirds.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407