Peter Principle

Job losses more than double in September

The Labor Department’s monthly report, released Friday, showed that 159,000 non-farm payroll jobs had been slashed, more than double the 73,000 jobs lost in August. First-time claims for unemployment benefits had increased last week to the highest level since the period after the 2001 terror attacks.

A deeper look at the labor data, some economists said, showed the “underemployment” rate had jumped to 11 percent — the highest level in 14 years — and the number of “discouraged workers” not seeking employment work also climbed.

“Factoring in discouraged workers raises the unemployment rate to about 7.9 percent,” said the University of Maryland’s Peter Morici, former chief economist of the U.S. International Trade Commission. “As the economy slows further, this figure will likely exceed 10 percent.”

Silicon Valley has been shedding jobs at a slower pace, with tech giants anticipating a continuing slowdown in their business. The most recent state jobs report showed unemployment in Santa Clara County at 6.5 percent and statewide at 7.7 percent. California and Silicon Valley may see some “pretty scary” unemployment numbers in months to come, Levy said.

The end of the BSD

The dirty little secret of the late boom? Many of the people who succeeded most flagrantly did so not because they were great at figuring out ways to make huge amounts of money. Rather, they scored because they were great at figuring out ways to make small amounts of money and then magnified their returns through the massive use of debt.

The Securities and Exchange Commission this week issued an order banning the short selling of several hundred financial stocks. As a result, many hedge funds are pulling in their horns and running for safety. [...] The BSDs are investing like grannies who survived the Great Depression. Riding out the storm by parking assets in cash is a smart strategy for a hedge fund that has already scored big gains for the year. But most hedge funds haven’t. Earlier this week, it was reported that, globally speaking, only one in 10 hedge funds is earning performance fees—i.e., the 20 percent of the fund’s gains that the managers keep as compensation.

Lehman Files for Bankruptcy; Merrill Is Sold

In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.

Last week was traumatic. But the crisis is still a long way from resolution.

Bankers with two or three decades of experience used the words “scary,” “terrifying” and “horrible” to describe the situation.

As Oil Giants Lose Influence, Supply Drops

Sluggish supplies have prompted a cottage industry of doomsday predictions that the world’s oil production has reached a peak. But many energy experts say these “peak oil” theories are misplaced. They say the world is not running out of oil — rather, the companies that know the most about how to produce oil are running out of places to drill.

“There is still a lot of oil to develop out there, which is why we don’t call this geological peak oil, especially in places like Venezuela, Russia, Iran and Iraq,” said Arjun Murti, an energy analyst at Goldman Sachs. “What we have now is geopolitical peak oil.”

In 1994, the top five oil companies spent 3 percent of their free cash on share buybacks and 15 percent on exploration. By 2007, they were spending 34 percent of their free cash on buybacks — in effect, propping up their share prices — and a mere 6 percent on exploration. [...] As a result, some experts warn that supplies will fall short of the demand over the next decade, perhaps sending prices well above today’s levels.

At a recent conference in Madrid, Christophe de Margerie, the chief executive of the French company Total, said the world would be hard-pressed to raise supplies beyond 95 million barrels a day by 2020. Only a few years ago, forecasters expected 120 million barrels a day by 2030, a level many analysts now view as unrealistic.