And now, for the good news?
Poor Jim Cramer. CNBC’s star stock-picker is as desperate to figure out what happens next as the rest of us. “It’s a completely humbling market,” the host of “Mad Money” told The New York Times’ David Carr in an interview. Cramer, a wild-eyed equities cheerleader, has been pummeled by critics after predicting that Bear Stearns “is not in trouble” in March, and that Wachovia was a bargain at $10.71 two weeks before it sunk to $1.84.
Some viewers blame Crammer for starting a stampede out of equities the dark week of October 6 when he advised viewers on the “Today” show to take “whatever money you may need for the next five years out of the stock market. Right now. This week.” Investors that did so were briefly incensed when the market rocketed up 936 points the following Monday, before giving up most of those gains the next day.
But don’t feel too bad for Cramer. Ratings for “Mad Money” have almost doubled from an average of 222,000 to 427,000 since Lehman Brothers announced that it was filing for bankruptcy, Merrill Lynch was acquired, and A.I.G. faltered, according to Carr. Cramer’s own net worth hasn’t been hugely threatened by what has become a global financial crisis either, since he has minimal exposure to equities to avoid conflicts of interest. While Cramer is taking some heat, he’s got to be smiling when no one is watching.
That’s not true for many other players wherever they play. Amid increasing signs of instability and volatile markets last week, France pledged to invest 360 billion euros into its banking system, and “Germany’s upper house of Parliament unanimously voted to adopt a $670.7 billion stabilization package,” according to reports. The Swiss government had announced a day earlier that it would invest $5.3 billion in “banking giant UBS to strengthen its capital base,” and loan the shaky financial giant another $54 billion.
The spreading financial malaise was also felt in Asia. Supposed-to-be-rock-solid Singapore said it will guarantee $102 billion in bank deposits for a two-year period, following an announcement by Hong Kong regulators making a similar pledge. South Korea announced “a package of foreign currency payment guarantees worth $100 billion for domestic banks to help stabilize the nation’s volatile financial markets,” and infused $30 billion outright into the banking system.
Here in the Philippines, despite its assurances that the economy is largely immune from the global financial crisis, government announced that it would double the level of deposits insured by the Philippine Deposit Insurance Corporation (PDIC) to 500,000 pesos by almost doubling PDIC’s capital base to 100 billion pesos. Positioned as a move to protect worried small depositors, the effort is aimed at protecting local banks from mass withdrawals. In reality, even with the increase, more than 95 percent of depositors are already protected. Nearly doubling PDIC’s capital will protect an additional two percent of depositors.
Government’s efforts to allay domestic fears received a boost from JP Morgan Chase, which said in a research note that real estate and equities have not grown at “bubble” levels, and are unlikely to collapse. JP Morgan – the largest U.S. bank in deposits following its acquisition of mortgage lender Washington Mutual – lost $3.6 billion in write-downs and $640 million in losses in the quarter ending September 30, an 84% plunge.
That was before things got really messy in October. So JP Morgan’s advice may be even less reliable than Cramer’s. The bank also said that the business process outsourcing sector, tourism, and overseas remittances also serve to inoculate the Philippine economy from financial meltdown. A survey conducted by AMR Research in the two weeks following the U.S. government announcement of its $750 billion bailout package for the financial industry offers some support for that argument. The results suggest that U.S. financial institutions are now ready to pursue outsourcing aggressively.
Researchers Phil Fersht and Dana Stiffler said that although the financial sector has traditionally been “reticent to adopt much outsourcing outside of IT areas, (the) meltdown will surely foster a new era of change and an embracing of long-term cost-containment strategies.” Although the survey included just 44 institutions, AMR says it offers a reasonable perspective of the changing mindset in the sector. Among banks, 48% of respondents said they plan to increase expenditure on outsourcing, and 41% will maintain expenditure. Only 10% said they would decrease expenditure.
Outsource2Philippines (O2P) and the Business Processing Association of the Philippines (BPA/P) are currently conducting a similar survey intended to assess the impact of the global financial crisis on the Philippine outsourcing sector. The results are expected to be available next week. They will show whether JP Morgan Chase and AMR Research have it right in their perspective of the industry.
But we’ll have to wait until next week to know if there’s good news, and whether Philippine BPOs, or at least some of them, are really benefiting from the meltdown. In the meantime, as my deadline approached Monday, Asian markets were perking up (Umm, except for the Philippines ). Too bad Cramer doesn’t follow Asian markets closely. If he did, and he suggested we’re in for trouble, then we might have reason to smile.