The Ominous Clouds of a Pink Slip Storm

Just how bad will the bloodletting get? This is what we know so far:

Credit Suisse handed out pink slips to 150 today. Bear Stearns laid off 240 from its mortgage units earlier in the summer. Lehman Brothers slashed 2,500 positions. Merrill Lynch made cuts in its subprime unit. JP Morgan is rumored to be next.

As industry cutbacks go, what we've seen so far is a mere scratch of the surface. Most of the layoffs have been confined to mortgage-related businesses, and they involve just a tiny fraction of total headcount (Credit Suisse's 44,000 other employees will hardly notice the 150 empty desks).

But it could just be the beginning, as many analysts and investors predict. Headline writers are certainly doing their part to fuel the fear:

NY Post: Brace For Big Job Losses on Wall Street and City

Financial Times: The Good Times are Over. Where Will the Axe Fall?

New York Sun: Bear Stearns Firings May Presage Trend

While the uncertainty may be paralyzing bankers from midtown to Wall Street, notable interested parties are getting their ducks in a row for more bloodshed. Yesterday, Bloomberg spoke to Kenneth Heebner, manager of the top-ranked real estate mutual fund in the U.S. It turns out that he recently dumped his holdings in SL Green Realty Corp., which is New York City's biggest office landlord.

Why? "You're seeing a retrenchment in the private-equity, hedge-fund and brokerage businesses, and there could be a lot of layoffs,'' Heebner said. "That could have a devastating impact on high-end residential real estate in New York. Appetite for office space will also decline.''

And Heebner's worth a listen. The manager had two-thirds of his real estate fund invested in homebuilder stocks in early 2005. He divested from all of them by the end of that year. Homebuilder stocks, Bloomberg notes, have fallen 67 percent since their peak in July 2005.

Just something to ponder. Now turn back to your Excel spreadsheet while you've still got work to do.

by Megan Barnett

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