See Table of Contents for Tiburon's Current Events Research Report

Tiburon Strategic Advisors, a market research & strategy consulting firm serving a wide variety of financial institutions and investment managers, is pleased to announce the release of its new research report on Current Events. This research release summarizes some of the report's key findings.

The purpose of this report is to provide readers with an initial understanding of current events and their impact on the financial services industry, various products & channels, and specific financial services firms. The report addresses world political events, world disasters, the economy & stock market, corporate scandals, financial services industry stumbles, presidential & congressional elections, and the regulatory environment. This is the second draft of Tiburon’s research on this topic.

Tiburon’s first draft of this report was published in 2008; that draft consolidated prior Tiburon research into one report. Because of the timing, that draft also included substantial details about the credit crisis and the 2008 presidential & congressional elections.

This is Tiburon's second draft of this report; this draft includes more details on the economic stimulus bill, the bank bailouts, other recent financial services industry stumbles (e.g., Bernie Madoff, Stanford Financial Group), and the new regulatory environment under President Obama. This draft also includes refined predictions and an initial appendix profiling the various federal & state governmental agencies that regulate the financial services industry.

Key Findings
This report has a long list of interesting facts to share:

Current Events History

  • Current events have evolved through five phases, including the Revolutionary War; Civil War; World War I, Great Depression, & World War II; world conflicts & stock market declines; & corporate scandals & financial services industry stumbles phases

Current Events Definition

  • Current events can specifically be defined to include world political events, world disasters, the economy & stock market, corporate scandals, financial services industry stumbles, presidential & congressional elections, & the regulatory environment
  • There has been $290 billion consumer investing behavior impact from current events

Current Events Growth

  • Specifically, current events growth can be measured by number of events, lives lost, jobs lost, consumer investing behavior impact, number of companies impacted, number of financial institutions impacted, & financial impact

Leading Current Events

  • Specifically, the leading current events can be measured by total events, lives lost, financial impact, consumer investing behavior impact, & jobs lost

Current Events Categories
This section explains the categories of current events.

World Political Events

  • The most devastating world political event in terms of loss of life in the past thirty years was the Afghanistan Civil War against Russia with one million lives lost
  • The Democrats swept both the Presidential & Congressional election in 2008

World Disasters

  • World disasters have evolved through three phases, including their early disasters, earthquakes, & hurricane phases
  • There have been 52 world disasters

Economy & Markets

  • The economy & stock market has evolved through three phases, including its Great Depression, growth, & troubled times phases
  • Full-service brokers view the economy & stock market only as a moderate challenge
  • Small company stocks have been the top performers over the long haul, with an annual return of 11.8% since 1926
  • The Chicago Board Options Exchange volatility index hit an unprecedented high of 80 in 2009
  • The CEOs of American International Group, The Bear Stearns Companies, & Lehman Brothers saw the collective value of their stock ownership drop from $3.1 billion to $113 million
  • The Economic Stabilization Act exceeds the cost of the entire new deal by over 30%

Corporate Scandals

  • ACorporate scandals have evolved through three phases, including their financial troubles, insider trading scandals, & accounting scandals phases
  • Kmart is the largest recent scandal in terms of lost jobs
  • Health South’s accountings fraud stretched back for a number of years, allegedly beginning in 1996
  • The Global Crossing lawsuit was originated by the Public Employees Retirement System of Ohio and the State Teacher’s Retirement System of Ohio

Financial Services Industry Stumbles

  • Recent financial services industry stumbles have evolved through four phases, including their pre-stumbles, early stumbles, wide-ranging stumbles, & credit crisis phases
  • There have been 85 financial services industry stumbles, with the peak coming in the most recent credit crisis phase
  • Financial services industry stumbles have had little impact on consumers’ investing & savings habits, offering an average score of 2.4
  • Full-service brokers view financial services industry stumbles as only a moderate challenge, offering an average score of 4.7
  • The number of companies impacted by financial services industry stumbles reached 700, up 600% since 1990 to 1996
  • Bank of America & Alliance Capital Management paid the biggest fines in the market timing scandal at $675 million & $600 million respectively
  • Smith Barney, Merrill Lynch, and Credit Suisse First Boston were the most prominent firms in the stock analyst scandal
  • Five firms paid a combined $36.2 million for failing to honor breakpoint discounts; Wachovia paid $9.7 million
  • Subprime mortgages grew to almost half of the market in 2007, up from 8% to 19% in 2003 to 2006
  • Subprime mortgage originations have increased rapidly to $1.3 trillion in 2007, Up 100% since 2005 & 2006 and 500% since 2002
  • There are $1.8 trillion mortgage-backed securities, down over 30% since its peak in 2003
  • Citigroup and Bank of America Corporation are the leaders in capital raised, having raised $75 billion and $60 billion, respectively
  • Fannie Mae has $600 billion mortgage-backed securities, down over 50% since its peak in 2003
  • Wells Fargo Corporation’s acquisition of Wachovia makes it the largest retail bank in terms of branches with 6,600 branches
  • There is $964 billion of outstanding credit card debt, up 20% since 2004
  • Credit card company tactics seem to be working as credit card debt has declined since its October 2008 peak

Presidential & Congressional Elections

  • The presidential & congressional elections have evolved through three phases, including their early democracy, 20th century democracy, & modern democracy phases
  • There have been 46 presidential & congressional election events, with the early democracy phase being the most active
  • Over half of voters believed that Barack Obama won the second debate
  • The Democratic Party spent $23.5 million contending for house seats during the 2008 congressional election
  • One-third of financial advisors do not have confidence in President Obama’s ability to fix the economy

Regulatory Environment

  • The regulatory environment has evolved through three phases, including its bank regulation, underwriting, and Glass Steagall restructuring phases
  • Nearly two-thirds of investors incorrectly believe that brokers and investment advisors offering fee-based advice are required to disclose all conflicts of interest prior to providing advice
  • Over three-quarters of investors believe legislation holding brokers to the same disclosure requirements as investment advisors would boost investor confidence

Making Sense of the Impacts of Today’s Market Events
This section outlines the impacts of today’s market events.

Significant Consumer Impacts in Terms of Loss of Retirement Funds, Decline in Confidence, Increase in Bankruptcies, & Delayed Retirements

  • Consumer household assets fell to $70 billion in 2008, off almost 10% since 2007
  • Consumer household net worth fell $11.0 trillion in 2008 to $51.5 trillion
  • Consumer households lost $2.0 trillion in real estate equity since 2006 to $8.9 trillion
  • There were 1.1 million personal bankruptcy filings in 2008, up over 100% since 2006 but down from the peak in 2005 with 2.1 million

Depressed Assets & Revenues, Enormous Losses & Write-Downs, Incredible Market Capitalization Declines, Huge Capital Raises, Huge Number of Financial Services Company Failures, & Dozens of Related Industry Impacts

  • The market capitalization of the four largest US banks has fallen from $1.1 trillion to $229 billion

Consumer Skepticism of Financial Services Industry, New Regulatory Regime, the Slow Righting of the Economy & Markets, & the Return to Simplicity

  • One-quarter of baby boomers believe that it is now more difficult to find a trustworthy source of retirement advice
  • Three-quarters of consumers believe that Bernie Madoff’s behavior type is common among financial advisors & financial institutions
  • Settlements of class action lawsuits tend to be for small shares of plaintiffs’ maximum claims
  • The unemployment rate is 7.2%, up from 4.8 in 2007 and at its highest since 1992
  • Investment manager clients are angry because almost all investment products failed, including theories around absolute returns & aligning fee structures, target date funds, municipal bonds, & money funds
  • Investment managers believe that independent reps & 401k retirement planners have the highest potential for 2009 net sales, with wirehouses having faded away
  • Target date mutual funds are likely to gather over $1.0 trillion in assets under management as boomers age

Abundant Financial Services Industry Investment Opportunities, Increasing Financial Services Industry M&A Activity, & the Return of Financial Services Industry Private Equity Investments

  • Public investment manager valuations have declined to historic lows at just 6.0x EBITDA, down over 50% since 2005 to 2006, creating a buyers’ market
  • Financial institutions buyouts accounted for 13% of all buyouts, up from just 6% in 2004 but still far below their share of all public companies

To better understand the developments for Current Events, executives can purchase Tiburon's Current Events: Making Sense of the Impacts of Today's Markets research report where the key findings highlighted above are covered in greater detail. Please contact Sarah Sage at SSage@TiburonAdvisors.Com or 415-789-2540.