A few months ago, when banking seemed to be on the upswing, I had lunch with a well-known hedge funder, who told me something surprising: he thought the financial-services industry would shrink by 30% within three years. I asked what led him to that conclusion given that the profits of the major banks were improving. "I see a lot of mediocre people making $400,000 a year at Morgan Stanley," he replied.
Fair enough. This incisive investor's hedging instincts were proved right in the past few weeks as banks in the U.S. and Europe laid off more than 60,000 people, and more...
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