Stock markets in Asia plunged on fears of the U.S. heading to recession. Dean advises MBA students: Prepare to engage in some missionary selling, to help employers discover your talent.
A market alert I got today from The Wall Street Journal reminded me 1997:
Stock markets in Asia plunged on fears that the U.S. is headed toward a recession. Hong Kong and Singapore each fell more than 5%, Japan dropped almost 4% and Mumbai's benchmark plummeted over 8% in late trading. European indexes were also down sharply, while Nymex oil futures were $1 lower in London trading.
http://online.wsj.com/article/SB120087864488004105.html?mod=djemalertMARKET
Here come some quotes from the blog of Robert F. Bruner, Dean, Darden School of Business about what MBA students and applicants should do:
My advice to MBA students and applicants is still to pursue your long-term career vision. In the near term, we are probably in for some turbulent flying. Don't get too picky about employment opportunities. Prepare to engage in some missionary selling, to help employers discover your talent. But also, don't lose confidence about the longer-term prospects. The World Bank projects 4.9% GNP growth for the world economy next year-this is down a shade from 2007 (5.2%) but remains pretty robust. And growth is expected to rise back to 5.1% in 2009. Many fundamental forces are aligning to sustain that kind of growth: technological change, trade liberalization, liberalization of markets, demographic change, etc. The odds seem strong that a new graduate from a top MBA school will face reasonably good demand for his or her skills over the long run.
And about the systemic nature of the crisis that helps us to predict what we should expect from the forthcoming one:
The financial crisis is in the headlines again; one of the most frequent questions I get is, "How much longer will this last?" Yesterday, the stock market dropped two percent on news of more loan write-offs at Citigroup. And the general fear is that the malaise in financial firms and housing will spread to other sectors of the U.S. economy and to other countries. Back in August, the conventional wisdom was that this subprime loan mess was a temporary inconvenience. Sam Stovall of S&P was more sober:
"Since 1950 we have had 48 pullbacks - meaning declines of 5 - 10%. We've had 18 corrections - meaning 10- 20%, and 8 bear markets. At the worst on average we end up getting back to normal in about 3 1/2 years. But people just don't want to wait that long and they let fear overtake their emotions."
He listed a range of possible scenarios: pullback, correction, bear market and "the worst," by which he probably meant a full financial crisis. By now, we know more about the gravity of the situation.
The correct answer to the question is that I don't know and I don't think anyone else does either. However, based on an understanding of previous financial crises, I don't think that we are close to the inflection point at which the good times resume. Studies[1] of past financial crises yield many insights, the chief of which is the systemic nature of crises-trouble breaks out somewhere and spreads rapidly because of complexity in markets and the absence of adequate shock absorbers. The trouble stops when there are no more losses to be taken, mainly because there are no more assets or institutions at risk (that is, the worst have been dissolved and the others have the capacity to withstand the crisis).
