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, various markets & distribution 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 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

  • The sub-prime mortgage crisis swept the nation in 2008
  • The US Government approved the Economic Stabilization Act on October 3, 2008 allowing it to purchase and manage up to $700 billion of mortgages, with the objective of stimulating the economy
  • Barack Obama was elected as the 44th president of the United States in 2008.

Current Events Definition

  • There have been 124 million jobs lost from current events

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

Economy & Markets

  • The stock market lost 86% during the 1929 to 1932 depression
  • Small company stocks have been the top performers over the long haul, with an annual return of 11.8% since 1926
  • Three-quarters of consumers believe that the credit crisis is just as serious or more serious than the dot come bubble burst
  • The Standard & Poor’s 500 had a return of -37% in 2008, its second worst year after only 1931
  • The total assets of public companies that declared bankruptcy was $1.1 trillion, up 150% since its previous peak in 2002
  • 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
  • First mortgage home defaults reached 2.7 million in 2008 & 2009, up 1,000% since 2007 and 300% since 2000 to 2006

Corporate Scandals

  • Income tax related corporate penalties reached $939 million, up almost 200% since 2002
  • Nortel executives inflated revenues by $3.1 billion in order to meet bonus targets

Financial Services Industry Stumbles

  • Smith Barney paid the biggest fine in the stock analyst scandal at $400 million, followed by Merrill Lynch & Credit Suisse each at $200 Million
  • Consumer households borrowed $2.7 trillion for mortgages, down from the peak of $3.9 trillion in 2003
  • First lien subprime mortgages without full documentation have been increasing, reaching 41% up from 22% in 1999
  • Merrill Lynch and Deutsche Bank were the leading underwriters & dealers of structured products with $11.8 billion and $11.3 billion respectively
  • There will be a peak of $3.4 trillion outstanding credit default swaps in 2013
  • The financial sector and households have increased their debt over the past ten years by 128% and 97% respectively
  • There will be a peak of 11,900 Alt-A adjustable rate mortgages resetting in December 2009
  • Bank of America’s acquisition of Merrill Lynch formed the largest brokerage firm in the world with 20,000 financial advisors
  • Lehman Brothers is the largest US corporate bankruptcy with $639 billion assets
  • Washington Mutual is the largest bank failure with $327.9 billion assets
  • JP Morgan Chase’s acquisition of Washington Mutual expanded its branch network to 5,410 branches, up 70% since before the merger
  • General Electric and Citigroup insure $36.9 billion and $29.5 billion in credit card debt, exposing themselves to large risk as delinquencies rise

Presidential & Congressional Elections

  • The Democratic Party accounted for nearly 95% of congressional election house spending in 2008
  • Almost two-thirds of financial advisors approve of President Obama’s performance since taking office

Regulatory Environment

  • Over three-quarters of investors are concerned about unequal fiduciary responsibilities for brokers and investment advisors

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, and Consumer Skepticism & Risk Aversion

  • The number of consumer households with over $5.0 million net worth is up 350% since 1997 but declined 28% in 2009 to 840,000
  • 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
  • Nearly half of firms sued in class action lawsuits in 2008 were financial services companies

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

  • Wachovia, Citigroup, & Merrill Lynch took the largest losses & write downs, having written off $95 billion, $75 billion, & $60 billion respectively
  • The market capitalization of the four largest US banks has fallen from $1.1 trillion to $229 billion

New Regulatory Regime

  • The Economic Stabilization Act was the largest government bail out ever, 250% larger than the Fannie Mae & Freddie Mac takeover
  • The US government’s troubled assets relief program investments have dropped in value by almost 50% to $110 billion

A Return to Simplicity

  • The United States inflation rate is 3.9%, down from its 1917 peak of 17.8% and a recent peak in 1980 of 13.6%
  • Financial institutions losses & write-offs may reach $1.0 trillion by 2013
  • Separately managed accounts were the hardest hit of all types of brokerage accounts in 2008, declining 39% to $460 billion
  • The Charles Schwab Corporation’s 5,500 fee-based financial advisors have brought in more assets than even Merrill Lynch’s 16,690 brokers since the beginning of 2007

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

  • 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.