8 days 7773/11022 = 30% down in 8 days from high to low
10-Oct-08 8,568.67 8,989.13 7,773.71 8,451.19 11,456,230,400 8,451.19
9-Oct-08 9,261.69 9,522.77 8,523.27 8,579.19 8,285,670,400 8,579.19
8-Oct-08 9,437.23 9,778.04 9,042.97 9,258.10 8,716,329,600 9,258.10
7-Oct-08 9,955.42 10,205.04 9,391.67 9,447.11 7,069,209,600 9,447.11
6-Oct-08 10,322.52 10,322.52 9,503.10 9,955.50 7,956,020,000 9,955.50
3-Oct-08 10,483.96 10,844.69 10,261.75 10,325.38 6,716,120,000 10,325.38
2-Oct-08 10,825.54 10,843.10 10,368.08 10,482.85 6,285,640,000 10,482.85
1-Oct-08 10,847.40 11,022.06 10,495.99 10,831.07 5,782,130,000 10,831.07
Monday, November 3, 2008
Oct the worst month in 21 years
Oct 1 2008 1160
Oct 15 2008 850 down 30%
So when the market falls so bad, as an investor how will someone react?
From 10/08 thru 10/15 i sold $53000 in 401k
Oct 15 2008 850 down 30%
So when the market falls so bad, as an investor how will someone react?
From 10/08 thru 10/15 i sold $53000 in 401k
Monday, September 15, 2008
DOW falls by 500 points
Sept 15 2008 DOW crashes by 500 points.
LEH down, MER bought by BAC, AIG needs capital.
LEH down, MER bought by BAC, AIG needs capital.
LEH files for Bankruptcy, BAC takesover MER, AIG raises capital
Sep 15 2008
LEH files for Bankruptcy, BAC takesover MER, AIG raises capital
S&P and Nasdaq Futures down a massive 4%.
The last post was on July 30th and that was when Meridith Witney has
stated that the credit crises will extend to 2010.
It is now more than a year since the credit crisis started.
We had seen BSC, LEH, Indymac blow up not to mention many smaller ones.
LEH files for Bankruptcy, BAC takesover MER, AIG raises capital
S&P and Nasdaq Futures down a massive 4%.
The last post was on July 30th and that was when Meridith Witney has
stated that the credit crises will extend to 2010.
It is now more than a year since the credit crisis started.
We had seen BSC, LEH, Indymac blow up not to mention many smaller ones.
Wednesday, July 30, 2008
Banking's Bear (Meredith Whitney) Roars Again
Banking's Bear Roars Again
by Megan Barnett May 20 2008
Just as Wall Street starts to have hope, Meredith Whitney strikes again.
RELATED CONTENT
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The Great Depression Debate
Worthless Wall Street Research
It's a Mad, Mad, Mad, Mad World
Hoping for a Fed Encore
Superfund for Banks
News
Fed takes steps to break through credit clogs AP
Government not expected to help more companies AP
Investors brace for Citigroup to post another loss AP
Closing Glance: Most media companies' shares fall AP
Closing Glance: Health Care equipment and supplies AP
See All Related Content
Topics
Meredith Whitney
Wall Street
Citigroup Inc.
See All Topics
Join the Conversation
12 Comments
Latest: Jul 18 2008 09:40am ET
Add a Comment
Read All Comments
Start the Conversation
Add a Comment
Photograph by: Daniel Acker/Bloomberg News /Landov
It's safe to say that no one has fewer friends on Wall Street than Meredith Whitney.
But the Oppenheimer analyst doesn't seem bothered by that fact, so she relentlessly continues to throw cold water in the face of her banking brethren.
Her latest report on the financial sector did just that. If you thought the worst is behind us, or that the credit crisis hit bottom in the first quarter, or that there are signs that the loan market is coming back, or that Wall Street firms are finished with their capital raising, Meredith Whitney has three words for you: You are wrong.
In fact, Whitney, who established a name for herself when she correctly predicted Citigroup's dividend cut last fall, believes the credit crisis will "extend well into 2009 and perhaps beyond." She predicts there are still more shoes to drop, that banks will need to cover another $170 billion in loan losses by the end of next year, and that the earnings expectations for Wall Street firms are currently grossly underestimated.
"We believe the real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything seen," she wrote in a report published last night.
Whitney says that the banks used "bad math" to finance mortgages, and they relied too much on the securitization market. Now consumers are left with very little liquidity, which will keep the market for new securities essentially closed for business. She says that regulators' too-little-too-late reaction to the housing bubble will lead to knee-jerk lending legislation that could end up hurting consumers instead of helping them. Whitney predicts that credit card lines will be reduced by 45 percent in 2010. And lower consumer liquidity will only lead to more losses for the banking sector.
Banking chiefs, of course, have not painted such a dire picture. In fact, many of them have suggested in recent weeks that the worst is over and that there are signs that the credit markets are being revived.
Who can you believe? Investors are hearing Whitney's voice loud and clear, much to the chagrin of Wall Street's leaders. Financial stocks are getting hammered today, with Citigroup, J.P. Morgan, Morgan Stanley, Wachovia, and Merrill Lynch all off more than 2 percent.
by Megan Barnett May 20 2008
Just as Wall Street starts to have hope, Meredith Whitney strikes again.
RELATED CONTENT
From Portfolio
The Great Depression Debate
Worthless Wall Street Research
It's a Mad, Mad, Mad, Mad World
Hoping for a Fed Encore
Superfund for Banks
News
Fed takes steps to break through credit clogs AP
Government not expected to help more companies AP
Investors brace for Citigroup to post another loss AP
Closing Glance: Most media companies' shares fall AP
Closing Glance: Health Care equipment and supplies AP
See All Related Content
Topics
Meredith Whitney
Wall Street
Citigroup Inc.
See All Topics
Join the Conversation
12 Comments
Latest: Jul 18 2008 09:40am ET
Add a Comment
Read All Comments
Start the Conversation
Add a Comment
Photograph by: Daniel Acker/Bloomberg News /Landov
It's safe to say that no one has fewer friends on Wall Street than Meredith Whitney.
But the Oppenheimer analyst doesn't seem bothered by that fact, so she relentlessly continues to throw cold water in the face of her banking brethren.
Her latest report on the financial sector did just that. If you thought the worst is behind us, or that the credit crisis hit bottom in the first quarter, or that there are signs that the loan market is coming back, or that Wall Street firms are finished with their capital raising, Meredith Whitney has three words for you: You are wrong.
In fact, Whitney, who established a name for herself when she correctly predicted Citigroup's dividend cut last fall, believes the credit crisis will "extend well into 2009 and perhaps beyond." She predicts there are still more shoes to drop, that banks will need to cover another $170 billion in loan losses by the end of next year, and that the earnings expectations for Wall Street firms are currently grossly underestimated.
"We believe the real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything seen," she wrote in a report published last night.
Whitney says that the banks used "bad math" to finance mortgages, and they relied too much on the securitization market. Now consumers are left with very little liquidity, which will keep the market for new securities essentially closed for business. She says that regulators' too-little-too-late reaction to the housing bubble will lead to knee-jerk lending legislation that could end up hurting consumers instead of helping them. Whitney predicts that credit card lines will be reduced by 45 percent in 2010. And lower consumer liquidity will only lead to more losses for the banking sector.
Banking chiefs, of course, have not painted such a dire picture. In fact, many of them have suggested in recent weeks that the worst is over and that there are signs that the credit markets are being revived.
Who can you believe? Investors are hearing Whitney's voice loud and clear, much to the chagrin of Wall Street's leaders. Financial stocks are getting hammered today, with Citigroup, J.P. Morgan, Morgan Stanley, Wachovia, and Merrill Lynch all off more than 2 percent.
Monday, July 7, 2008
How The Bubble Bursts
How The Bubble Bursts
Fed Chooses Wall Street Over Main Street
Free Market In Jeopardy
U.S. Banking System on the Fritz
The Great Dumbing Down of the Market
The Exchange
Deleveraging Continues
As leveraged assets go down in value, the leverage multiples go up. Adding to that multiple is the falling dollar and the fact that these assets are in reality debt deposits, not cash deposits, that were passed on in different forms to be leveraged over and over.
Read More
-Minyan Jim
How The Bubble Bursts
Mr Practical Jul 02, 2008 11:00 am
Understanding inflation and deflation.
8 Secrets Your Credit Card Company Won’t Tell You
Now that we’re getting a taste of what deflation is, it’s easier to talk about. Before, I tried to describe what to expect and how to deal with it, but in a way that was difficult for the average person to understand - especially when the government, the Fed, and Wall Street continue to misrepresent it.
Now that we’ve seen the beginning stages of deflation, it’s becoming clearer what’s going on and what’s important: to conserve capital. To save.
So let’s review what inflation and deflation really are.
The traditional definition of inflation (rising prices) and deflation (falling prices) don’t make sense in today’s world. That’s why people are confused. Ironically, the Fed wants you to be this confused, because it’s actually they who create inflation - which plants the seeds for eventual deflation.
Inflation’s just the expansion of the money supply, almost always through the expansion of debt. This is what the Fed does: They create debt out of thin air and pass that debt on to the banking system by extending credit; banks then extend it to consumers.
From 1993 to 2006 the Fed created massive inflation by creating massive debt, keeping real interest rates negative and supplying plenty of credit to keep them there. This was particularly true from 2001 to 2006; in 2006 alone the Fed expanded the money supply by creating $4 trillion in new debt.
Click to enlarge
People who had no business borrowing took money from people who had no business lending. This drove the prices of the cars and house they bought with that money up, while the debt drove the value of the currency down. This doubles the pressure on the prices of things we get from other countries - like oil.
So it isn’t hard to convince people that inflation means rising prices, because rising prices almost always occur when the money supply’s inflated with debt.
In 2007, we reached a point where there was just too much debt; no one could take on any more. This is where the Fed’s inflation machine breaks down: If no one can borrow or lend on the credit they offer the banking system, the money supply stops expanding. In fact, as people try to pay off all that debt (retire it) or default on it (destroy it), the money supply, bloated with debt, begins to shrink. Hence deflation.
What does the Fed do then? Why, they buy that debt themselves, to try to keep the money supply from deflating. This leads to those TAF (term auction facility) auctions you’ve heard about, where the Fed exchanges new capital (t-bills) for bad debts with banks.
Despite these efforts, the money supply has probably deflated by the amount of write-offs -- by now, approximately $400 billion -- that banks have incurred. Strict measures of money supply, like M3, haven’t fallen - but that doesn’t include the most important broad sources of new money, like derivatives and securitized loans. As the money supply deflates, people borrow less and spending goes down. The deflation thus feeds on itself, because lower spending means lower income and debt becomes even harder to support. Prices in stocks begin to fall as the money supply dwindles.
Central banks are powerless to stop the money supply from deflating unless they take on the debt themselves. If not, it will be systematically destroyed by defaulting, and the money supply will shrink even more.
As central banks fight this by taking on debt (as in TAFs and the Bear Stearns bailout), taxpayers will be called upon to make up the losses. Ironically, the Fed’s attempts to keep the money supply inflated are much worse for the average person, who suffers from a declining dollar and higher taxes in the long run.
Why doesn’t this happen all the time, you ask? It does - it just usually happens in smaller increments. What’s happening now is different only in terms of magnitude: The money supply has been so debt-inflated for so long that the reversal is very significant. Over the years, it just adds up: Few realize just how much debt’s still out there.
When a bank takes a write-off, debt gets smaller - but we still have a long way to go. How long? Well, the level of debt’s currently four to five times greater than is normal for our economy; the natural level of income and savings aren’t enough to support the debt. Debt will get destroyed -- and the money supply will deflate -- until debt and actual savings are more balanced.
If you understand inflation and deflation in this way, our current crisis makes more sense. Now we’re seeing deflation (a shrinking money supply and lost liquidity), which is causing havoc in markets.
We’re still seeing prices rise on certain scarce commodities as various competing forces work their way through the system; but that’s to be expected, because those rising prices are caused by more debt, which will eventually make the debt untenable as income goes down.
We’re seeing formerly powerful financial institutions destroyed by even these first stages of deflation. That’s because their only power came from franchise - from being able to take out high-risk spreads. So they actually had very little capital to support vast amounts of debt when things began to sour.
High risk has been rewarded in the past by government (easy monetary policy), legislation (the repeal of Glass-Steagall, now clearly a mistake), and the markets (the Wall Street marketing machine). Those rewards fall away quickly when you see that you have built your house built on sand.
For decades, but especially over the last seven years, central banks have “solved” any and all market dips, slowing economies, and financial problems by creating debt. If the stock market declines, just make it easy to borrow, so people can buy stocks. If the economy slows, just make it easy to borrow, so people can consume more. This methodology may work on occasion, but doing it systematically leads to crisis.
Central banks can’t fix this problem: They can only create more banking debt or transfer its risks onto taxpayers via TAF auctions or nationalization - which will only stabilize the banking system long enough for banks to dilute themselves massively by suckering investors into buying stock. More debt isn’t the solution.
So stay the course. Stay out of the way. Bottom feeders keep coming up empty. There will be rallies in stocks. Some will be quite vicious, but that doesn’t mean we’re in a bull market. The GDP’s going to go way down, but will eventually come back when debt is wiped out to a point where those with savings want to lend or invest again.
We have a long way to go, though - and risk is high
Fed Chooses Wall Street Over Main Street
Free Market In Jeopardy
U.S. Banking System on the Fritz
The Great Dumbing Down of the Market
The Exchange
Deleveraging Continues
As leveraged assets go down in value, the leverage multiples go up. Adding to that multiple is the falling dollar and the fact that these assets are in reality debt deposits, not cash deposits, that were passed on in different forms to be leveraged over and over.
Read More
-Minyan Jim
How The Bubble Bursts
Mr Practical Jul 02, 2008 11:00 am
Understanding inflation and deflation.
8 Secrets Your Credit Card Company Won’t Tell You
Now that we’re getting a taste of what deflation is, it’s easier to talk about. Before, I tried to describe what to expect and how to deal with it, but in a way that was difficult for the average person to understand - especially when the government, the Fed, and Wall Street continue to misrepresent it.
Now that we’ve seen the beginning stages of deflation, it’s becoming clearer what’s going on and what’s important: to conserve capital. To save.
So let’s review what inflation and deflation really are.
The traditional definition of inflation (rising prices) and deflation (falling prices) don’t make sense in today’s world. That’s why people are confused. Ironically, the Fed wants you to be this confused, because it’s actually they who create inflation - which plants the seeds for eventual deflation.
Inflation’s just the expansion of the money supply, almost always through the expansion of debt. This is what the Fed does: They create debt out of thin air and pass that debt on to the banking system by extending credit; banks then extend it to consumers.
From 1993 to 2006 the Fed created massive inflation by creating massive debt, keeping real interest rates negative and supplying plenty of credit to keep them there. This was particularly true from 2001 to 2006; in 2006 alone the Fed expanded the money supply by creating $4 trillion in new debt.
Click to enlarge
People who had no business borrowing took money from people who had no business lending. This drove the prices of the cars and house they bought with that money up, while the debt drove the value of the currency down. This doubles the pressure on the prices of things we get from other countries - like oil.
So it isn’t hard to convince people that inflation means rising prices, because rising prices almost always occur when the money supply’s inflated with debt.
In 2007, we reached a point where there was just too much debt; no one could take on any more. This is where the Fed’s inflation machine breaks down: If no one can borrow or lend on the credit they offer the banking system, the money supply stops expanding. In fact, as people try to pay off all that debt (retire it) or default on it (destroy it), the money supply, bloated with debt, begins to shrink. Hence deflation.
What does the Fed do then? Why, they buy that debt themselves, to try to keep the money supply from deflating. This leads to those TAF (term auction facility) auctions you’ve heard about, where the Fed exchanges new capital (t-bills) for bad debts with banks.
Despite these efforts, the money supply has probably deflated by the amount of write-offs -- by now, approximately $400 billion -- that banks have incurred. Strict measures of money supply, like M3, haven’t fallen - but that doesn’t include the most important broad sources of new money, like derivatives and securitized loans. As the money supply deflates, people borrow less and spending goes down. The deflation thus feeds on itself, because lower spending means lower income and debt becomes even harder to support. Prices in stocks begin to fall as the money supply dwindles.
Central banks are powerless to stop the money supply from deflating unless they take on the debt themselves. If not, it will be systematically destroyed by defaulting, and the money supply will shrink even more.
As central banks fight this by taking on debt (as in TAFs and the Bear Stearns bailout), taxpayers will be called upon to make up the losses. Ironically, the Fed’s attempts to keep the money supply inflated are much worse for the average person, who suffers from a declining dollar and higher taxes in the long run.
Why doesn’t this happen all the time, you ask? It does - it just usually happens in smaller increments. What’s happening now is different only in terms of magnitude: The money supply has been so debt-inflated for so long that the reversal is very significant. Over the years, it just adds up: Few realize just how much debt’s still out there.
When a bank takes a write-off, debt gets smaller - but we still have a long way to go. How long? Well, the level of debt’s currently four to five times greater than is normal for our economy; the natural level of income and savings aren’t enough to support the debt. Debt will get destroyed -- and the money supply will deflate -- until debt and actual savings are more balanced.
If you understand inflation and deflation in this way, our current crisis makes more sense. Now we’re seeing deflation (a shrinking money supply and lost liquidity), which is causing havoc in markets.
We’re still seeing prices rise on certain scarce commodities as various competing forces work their way through the system; but that’s to be expected, because those rising prices are caused by more debt, which will eventually make the debt untenable as income goes down.
We’re seeing formerly powerful financial institutions destroyed by even these first stages of deflation. That’s because their only power came from franchise - from being able to take out high-risk spreads. So they actually had very little capital to support vast amounts of debt when things began to sour.
High risk has been rewarded in the past by government (easy monetary policy), legislation (the repeal of Glass-Steagall, now clearly a mistake), and the markets (the Wall Street marketing machine). Those rewards fall away quickly when you see that you have built your house built on sand.
For decades, but especially over the last seven years, central banks have “solved” any and all market dips, slowing economies, and financial problems by creating debt. If the stock market declines, just make it easy to borrow, so people can buy stocks. If the economy slows, just make it easy to borrow, so people can consume more. This methodology may work on occasion, but doing it systematically leads to crisis.
Central banks can’t fix this problem: They can only create more banking debt or transfer its risks onto taxpayers via TAF auctions or nationalization - which will only stabilize the banking system long enough for banks to dilute themselves massively by suckering investors into buying stock. More debt isn’t the solution.
So stay the course. Stay out of the way. Bottom feeders keep coming up empty. There will be rallies in stocks. Some will be quite vicious, but that doesn’t mean we’re in a bull market. The GDP’s going to go way down, but will eventually come back when debt is wiped out to a point where those with savings want to lend or invest again.
We have a long way to go, though - and risk is high
Monday, June 23, 2008
June 23 2008 DOW(n) 233 pts
June 23 2008 dow closes down 233 points at 11822.
How low will it go?
How high OIL will go? Weekend there was the Jeddah talks about more oil production.
A year back OIL was at $65 and today it is at $138.
How low will it go?
How high OIL will go? Weekend there was the Jeddah talks about more oil production.
A year back OIL was at $65 and today it is at $138.
LEH CEO makes $500m while shareholders lose...
Lessons from the house of Lehman
What can we glean from Wall Street's current soap opera?
By Allan Sloan, senior editor at large
Last Updated: June 23, 2008: 7:57 AM EDT
Lehman Brothers CEO Richard Fuld
More from Fortune
The evolution of John McCain
What Obama means for business
Gates without Microsoft; Microsoft without Gates
FORTUNE 500
Current Issue
Subscribe to Fortune
(Fortune Magazine) -- Lehman Brothers, a firm with a storied past but an uncertain present, has turned into Wall Street's latest drama - a modern-day financial version of the "Perils of Pauline," the famous damsel-in-distress flick. At this point in the Lurches of Lehman, we aren't certain whether chief executive Dick Fuld will become Wall Street's latest human sacrifice or whether the firm itself will survive or in what form. But even with the drama still ongoing, here are a few things to think about the Lehman mess.
The rich get richer, no matter what. When you look at Fuld's compensation package, you have to laugh at the idea that giving CEOs big slugs of equity aligns their interests with those of regular shareholders. Lehman's stock was down some 60% for the year as Fortune went to press, but Fuld hasn't been asked to return a single penny that he made from selling stock he received as compensation.
By Fortune's count, Fuld, a bond trader turned CEO, has realized almost half-a-billion dollars from cashing in stock options and restricted stock awards since Lehman (LEH, Fortune 500) went public in 1994. (I'm mentioning his stock swag but not his salary or bonus to show you how stock compensation can work out great for the Fulds of the world, but not so great for shareholders.) By our calculation, which Lehman declined to discuss, Fuld has knocked down $489.7 million (before taxes) from selling 14.4 million optioned and restricted shares. (He seems to have kept 2.7 million.) His best year was 2001, when he collected more than $100 million. Last year, when Lehman stock fell 16% as the debt markets seized up in the summer, he still realized $53 million. You can find the juicy year-by-year totals, compiled by my colleague Doris Burke, at right.
Even by Wall Street standards this is serious money. To be sure, Fuld is a Lehman lifer and has gotten a lot of credit - and money - for supposedly doing a good job over the years. As his stock sales show, though, none of us need cry for him if he now pays the price for failure.
Lehman won't fail, but its stock ain't necessarily a bargain. Lots of players, including the Federal Reserve Board and most of us ordinary people, have a stake in Lehman's not collapsing. (So does my employer Time Inc., which sublet ten floors in the Time & Life Building to Lehman near the height of Manhattan's commercial property boom.) The Fed's concern is global: that a Lehman collapse, following so closely on the Bear Stearns implosion in March, would undermine faith in the world financial system. Without faith, the system won't work. You know, of course, that shortly after the Fed orchestrated the sale of Bear Stearns to J. P. Morgan (JPM, Fortune 500) it set up a facility to make virtually unlimited amounts of money available to the likes of Lehman. (The timing was intentional.) Unless short-sellers and hedge funds can somehow overwhelm the Fed, it won't let Lehman fail.
That doesn't mean Lehman's stock price will rise or the Fed won't force a sale on terms that shareholders won't like. The Fed cares about Lehman's survival, but not about its stock price. In fact, one reason the stock has fallen so much is that under Fed pressure, Lehman last month raised $6 billion on terms that sent its share price plunging.
Size doesn't matter - competence does. Lehman is the smallest of the Big Four investment banks. But it's not in trouble because it's too small, which many people seem to think. As Fortune.com's Roddy Boyd has pointed out, Lehman got itself in trouble because it overreached, straining its balance sheet and playing unsuccessful games in the commercial property and residential real estate businesses. Some giant so-called universal banks like Citi (C, Fortune 500), UBS (UBS), and Wachovia (WB, Fortune 500), far larger than Lehman, are horribly messed up - their size didn't save them. This isn't basketball, where a good big man will almost always beat a good small man, head to head. It's finance. Will that particular lesson ever be learned, considering Wall Street's current woes? No way. Pass the options, please.
What can we glean from Wall Street's current soap opera?
By Allan Sloan, senior editor at large
Last Updated: June 23, 2008: 7:57 AM EDT
Lehman Brothers CEO Richard Fuld
More from Fortune
The evolution of John McCain
What Obama means for business
Gates without Microsoft; Microsoft without Gates
FORTUNE 500
Current Issue
Subscribe to Fortune
(Fortune Magazine) -- Lehman Brothers, a firm with a storied past but an uncertain present, has turned into Wall Street's latest drama - a modern-day financial version of the "Perils of Pauline," the famous damsel-in-distress flick. At this point in the Lurches of Lehman, we aren't certain whether chief executive Dick Fuld will become Wall Street's latest human sacrifice or whether the firm itself will survive or in what form. But even with the drama still ongoing, here are a few things to think about the Lehman mess.
The rich get richer, no matter what. When you look at Fuld's compensation package, you have to laugh at the idea that giving CEOs big slugs of equity aligns their interests with those of regular shareholders. Lehman's stock was down some 60% for the year as Fortune went to press, but Fuld hasn't been asked to return a single penny that he made from selling stock he received as compensation.
By Fortune's count, Fuld, a bond trader turned CEO, has realized almost half-a-billion dollars from cashing in stock options and restricted stock awards since Lehman (LEH, Fortune 500) went public in 1994. (I'm mentioning his stock swag but not his salary or bonus to show you how stock compensation can work out great for the Fulds of the world, but not so great for shareholders.) By our calculation, which Lehman declined to discuss, Fuld has knocked down $489.7 million (before taxes) from selling 14.4 million optioned and restricted shares. (He seems to have kept 2.7 million.) His best year was 2001, when he collected more than $100 million. Last year, when Lehman stock fell 16% as the debt markets seized up in the summer, he still realized $53 million. You can find the juicy year-by-year totals, compiled by my colleague Doris Burke, at right.
Even by Wall Street standards this is serious money. To be sure, Fuld is a Lehman lifer and has gotten a lot of credit - and money - for supposedly doing a good job over the years. As his stock sales show, though, none of us need cry for him if he now pays the price for failure.
Lehman won't fail, but its stock ain't necessarily a bargain. Lots of players, including the Federal Reserve Board and most of us ordinary people, have a stake in Lehman's not collapsing. (So does my employer Time Inc., which sublet ten floors in the Time & Life Building to Lehman near the height of Manhattan's commercial property boom.) The Fed's concern is global: that a Lehman collapse, following so closely on the Bear Stearns implosion in March, would undermine faith in the world financial system. Without faith, the system won't work. You know, of course, that shortly after the Fed orchestrated the sale of Bear Stearns to J. P. Morgan (JPM, Fortune 500) it set up a facility to make virtually unlimited amounts of money available to the likes of Lehman. (The timing was intentional.) Unless short-sellers and hedge funds can somehow overwhelm the Fed, it won't let Lehman fail.
That doesn't mean Lehman's stock price will rise or the Fed won't force a sale on terms that shareholders won't like. The Fed cares about Lehman's survival, but not about its stock price. In fact, one reason the stock has fallen so much is that under Fed pressure, Lehman last month raised $6 billion on terms that sent its share price plunging.
Size doesn't matter - competence does. Lehman is the smallest of the Big Four investment banks. But it's not in trouble because it's too small, which many people seem to think. As Fortune.com's Roddy Boyd has pointed out, Lehman got itself in trouble because it overreached, straining its balance sheet and playing unsuccessful games in the commercial property and residential real estate businesses. Some giant so-called universal banks like Citi (C, Fortune 500), UBS (UBS), and Wachovia (WB, Fortune 500), far larger than Lehman, are horribly messed up - their size didn't save them. This isn't basketball, where a good big man will almost always beat a good small man, head to head. It's finance. Will that particular lesson ever be learned, considering Wall Street's current woes? No way. Pass the options, please.
Friday, June 6, 2008
Friday June 6 DOW down 400
Unemployment rate zoomed to 5.5%. Biggest jobless jump since 1986.
However this could be due to new grads joining the pool.
OIL soars more than $10 to Record. Merrill states oils is going to $150 by July 4.
DOW crashes 400 points.
On June 2 i did state that
buy commodities or stay in cash.
However this could be due to new grads joining the pool.
OIL soars more than $10 to Record. Merrill states oils is going to $150 by July 4.
DOW crashes 400 points.
On June 2 i did state that
buy commodities or stay in cash.
Monday, June 2, 2008
June 2 2008 musings.
Bill Gross: Lies, Damn Lies and Government Inflation Data
see complete article below.
Here is what i think is going to work eventhough i am not a big fan of
commodities.
1. Commodities (DBC, DBA, POT ...
2. Cash or Good short term debt
3. Preferreds or bank loans. if economy sours then the bank loans can go south.
4. Equity ( MSFT, ORCL, GE(??))
banks/retail/consumer discretion would be duds till the commodities cool
and consumer spending picks up.
Bill Gross: Lies, Damn Lies and Government Inflation Data
Posted Jun 02, 2008 12:26pm EDT by Aaron Task in Investing, Newsmakers, Recession
Related: PTTAX, ING, ^SPX, SPY, TLT
Pimco's Bill Gross provides detailed analysis on what most Americans already know: The government's "official" data understates inflation.
Gross' treatise focuses on how CPI is compiled -- with hedonic adjustments and "owners' equivalent rents" -- in a way that's unique in the industrialized world. Such adjustments and a focus on "core" inflation -- or "inflation excluding inflation" as Barry Ritholtz calls it -- help explain why the Fed is far less concerned about inflation than central bankers in other parts of the world.
If the financial markets were to "readjust" to actual inflation, the stock market would lose 10% of its value and the bond market 5%, Gross says.
Gross, whose firm manages more than $800 billion in mostly fixed-income assets, fails to explain why stocks (and real estate, for that matter) will suffer more than bonds in this hypothetical "readjustment of investor mentality."
see complete article below.
Here is what i think is going to work eventhough i am not a big fan of
commodities.
1. Commodities (DBC, DBA, POT ...
2. Cash or Good short term debt
3. Preferreds or bank loans. if economy sours then the bank loans can go south.
4. Equity ( MSFT, ORCL, GE(??))
banks/retail/consumer discretion would be duds till the commodities cool
and consumer spending picks up.
Bill Gross: Lies, Damn Lies and Government Inflation Data
Posted Jun 02, 2008 12:26pm EDT by Aaron Task in Investing, Newsmakers, Recession
Related: PTTAX, ING, ^SPX, SPY, TLT
Pimco's Bill Gross provides detailed analysis on what most Americans already know: The government's "official" data understates inflation.
Gross' treatise focuses on how CPI is compiled -- with hedonic adjustments and "owners' equivalent rents" -- in a way that's unique in the industrialized world. Such adjustments and a focus on "core" inflation -- or "inflation excluding inflation" as Barry Ritholtz calls it -- help explain why the Fed is far less concerned about inflation than central bankers in other parts of the world.
If the financial markets were to "readjust" to actual inflation, the stock market would lose 10% of its value and the bond market 5%, Gross says.
Gross, whose firm manages more than $800 billion in mostly fixed-income assets, fails to explain why stocks (and real estate, for that matter) will suffer more than bonds in this hypothetical "readjustment of investor mentality."
Tuesday, May 27, 2008
OIL up up and away...$4/gl
Last post was on May 9th and i stated that
DOW is not going anywhere past 12500.
Before the memorial day weekend, DOW closed at 12487.
OIL $4 and grains/gold are still high.
Dick Bove states there is lot of capital but it is sitting on
the sidelines. Also he predicts the inflation calculated by
Reagan methods is 11% and not the 4% the govt claims.
He states that the capital is sitting on the sidelines with the soverign
funds and the money supply in the first quarter (M3) is explosive growing
at 16%.
9 may dow 12700
15 may dow 12992
19 may dow 13028
21 may dow 12601
23 may dow 12479.
from 19 thru 23 a fall of 4.3% 12479/13028
DOW is not going anywhere past 12500.
Before the memorial day weekend, DOW closed at 12487.
OIL $4 and grains/gold are still high.
Dick Bove states there is lot of capital but it is sitting on
the sidelines. Also he predicts the inflation calculated by
Reagan methods is 11% and not the 4% the govt claims.
He states that the capital is sitting on the sidelines with the soverign
funds and the money supply in the first quarter (M3) is explosive growing
at 16%.
9 may dow 12700
15 may dow 12992
19 may dow 13028
21 may dow 12601
23 may dow 12479.
from 19 thru 23 a fall of 4.3% 12479/13028
Friday, May 9, 2008
"Looks like a good runup and time market took a breather."
Is what i wrote last on April 25 Looks - Apri; 25 12891 DOW
May 09 - AIG screws up - Wants to raise 12 billion expected loss 0.76/sh cents
posts $3.09/sh loss. Down 8% in pre-market. OIL up $125.
I think the market is not going to go up beyond 12500 for sometime till OIL
subsides and the the credit crunch settles down.
Is what i wrote last on April 25 Looks - Apri; 25 12891 DOW
May 09 - AIG screws up - Wants to raise 12 billion expected loss 0.76/sh cents
posts $3.09/sh loss. Down 8% in pre-market. OIL up $125.
I think the market is not going to go up beyond 12500 for sometime till OIL
subsides and the the credit crunch settles down.
Friday, April 25, 2008
April 25th
From GE results (april 11) till today (April 25), S&P is up 4.2%, NASDAQ is
up 5.7%. What happened in between. GE bad, GOOG, CAT good, MSFT ok.
Looks like a good runup and time market took a breather.
Nobel Winner Stiglitz: US Facing Long Recession
Friday April 25, 12:16 pm ET
The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.
"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.
ADVERTISEMENT
"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.
He explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.
Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it.
"[The Fed] will be between a rock and hard place. And we're not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector," he said.
And if inflation wasn't the prime recession cause, it's still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.
"Oil is particularly bad," as it means that more U.S. dollars "will be going abroad," he said.
The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.
"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.
"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.
What about the government stimulus package?
"The Bush Administration's response is too little, too late -- and very badly designed," he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a "drop in the bucket" compared to the money being held back and siphoned out by the factors he mentioned.
"If you really wanted to stimulate the economy, increase unemployment insurance," he suggested.
"The president is telling people to go out and get jobs -- and there are no jobs for them," he said.
up 5.7%. What happened in between. GE bad, GOOG, CAT good, MSFT ok.
Looks like a good runup and time market took a breather.
Nobel Winner Stiglitz: US Facing Long Recession
Friday April 25, 12:16 pm ET
The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.
"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.
ADVERTISEMENT
"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.
He explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.
Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it.
"[The Fed] will be between a rock and hard place. And we're not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector," he said.
And if inflation wasn't the prime recession cause, it's still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.
"Oil is particularly bad," as it means that more U.S. dollars "will be going abroad," he said.
The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.
"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.
"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.
What about the government stimulus package?
"The Bush Administration's response is too little, too late -- and very badly designed," he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a "drop in the bucket" compared to the money being held back and siphoned out by the factors he mentioned.
"If you really wanted to stimulate the economy, increase unemployment insurance," he suggested.
"The president is telling people to go out and get jobs -- and there are no jobs for them," he said.
Sunday, April 13, 2008
GE saga
After the BSC saga, C got some funding from private equity,
Wamu got some and the stock market went up from the low of
1270 to 1370.
Most magazines were blaring that we had seen the bottom.
Then comes GE with a warning and the stock tanking 20%.
In a way, that is good for me since i am short GE.
Inflation, 80000 jobs lost in march (3rd month down in a row)
and what is going to cause this market to stablize of go up?
There seems to be enough cash in the sidelines, but a good chunk of
this may be smart cash.
Wamu got some and the stock market went up from the low of
1270 to 1370.
Most magazines were blaring that we had seen the bottom.
Then comes GE with a warning and the stock tanking 20%.
In a way, that is good for me since i am short GE.
Inflation, 80000 jobs lost in march (3rd month down in a row)
and what is going to cause this market to stablize of go up?
There seems to be enough cash in the sidelines, but a good chunk of
this may be smart cash.
Tuesday, April 1, 2008
April 01 2008
Just yesterday,i was feeling that i should pare down
the debt for vehicle. With DOW up 400 today, it appears natural to feel
that i should jump headlong into stks.
UP's make you feel regret for not getting earlier, DOWN makes
you feel that it is still not down to cover your shorts.
Volatility causes so much vacillation that it makes sense to
have a PP slide that clearly spells what one needs to do.
the debt for vehicle. With DOW up 400 today, it appears natural to feel
that i should jump headlong into stks.
UP's make you feel regret for not getting earlier, DOWN makes
you feel that it is still not down to cover your shorts.
Volatility causes so much vacillation that it makes sense to
have a PP slide that clearly spells what one needs to do.
Tue April 01 2008 DOW UP 400
Up's are getting bigger. Downs are getting smaller.
Short term market seems to be going up.
Next leg down, cover ge, close sds and start going long slowly.
Short term market seems to be going up.
Next leg down, cover ge, close sds and start going long slowly.
Monday, March 31, 2008
WHEN the going gets bad, it is a freefall.
When the going gets good, everyone rolls in $$$ and overextend.
When it gets bad, it is a freefall.
Careers vanish after subprime 'free fall'
Kent and Mysti Cope were well-paid executives at subprime lenders who never thought the industry could disappear overnight. Now they're just trying to get by.
EMAIL | PRINT | DIGG | RSS Subscribe to Economy
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Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close) By Chris Isidore, CNNMoney.com senior writer
March 31, 2008: 5:30 AM EDT
Mysti and Kent Cope met when both worked at subprime lender New Century. Both lost their jobs last year when the industry collapsed.
Getting back in the job game
More Videos
--------------------------------------------------------------------------------
Homes for sale - cheap
More VideosPhotos
America's Money: In their own words
Everyday folks tell their stories about hard economic times. Check back frequently for new stories.
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Current Mortgage Rates
Type Overall avgs
30 yr fixed mtg 5.75%
15 yr fixed mtg 5.27%
30 yr fixed jumbo mtg 7.16%
5/1 ARM 5.67%
5/1 jumbo ARM 6.36%
Find personalized rates:
Fed up with the Fed
What would you ask Big Oil?
Color therapy to beat recession blues
Paulson offers sweeping rule changes
Careers vanish after subprime 'free fall'
SAN CLEMENTE, Calif. (CNNMoney.com) -- Kent and Mysti Cope met and fell in love working for one of the nation's top subprime lenders. Now, their life has been turned upside down after the sudden implosion of the subprime mortgage industry.
Mysti was one of the last people out the door at New Century Financial, once the nation's No. 2 subprime lender. She had been in charge of e-commerce customer service with dozens of employees reporting to her. It was at New Century where the Copes met in 2000.
Kent worked for several of the firms that helped give birth to the industry, which specializes in making loans to people with less-than-perfect credit, in the 1990s. He has been out of work since August when he was laid off by Friedman, Billings, Ramsey Group (FBR) unit First NLC Financial Services.
"We're still both in shock that it could go from something so good to so bad so quick," said Kent, 59. "New Century in 60 days went from top of the heap to out of business."
The two didn't say exactly how much money they made at their last jobs but Kent admitted they each had six-figure incomes.
Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month.
Only $1,800 to cover $10,000 in bills
Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.
Kent estimates the mountainside home in San Clemente, Calif., which they bought in 2005, is worth 20% less than it was a year ago. And in the current market, he said he's not sure he could sell it for even that amount.
"We've used up most of our reserves, cashed in her 401K," said Kent. "We're going Mach 1 into a wall. When we run into it, then we've got to decide what to do next."
Despite their financial problems, the Copes have worked hard to protect their credit rating, staying current on bills. And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example. But the couple also has learned that it didn't need everything it used to spend money on.
"We used to eat out a lot. Now we are the leftover king and queen," said Kent.
Since he lost his job, Kent has gotten a real estate license and is trying to start a business selling the rapidly increasing inventory of foreclosed homes in Orange County, Calif. Mysti is trying to build an online business selling jewelry and beachwear, some of which she designs herself.
"Is it scary? Yeah," said Kent. "How long do you have to hold on before it starts to turn around? If anything, that piece of it is the most unnerving for us."
For Mysti, 37, all her efforts to find work since she lost her job last May have been futile. She said she believes the attention given to subprime borrowers who have run into trouble paying their mortgages work against her and other former colleagues. It's almost like having "Enron" on your resume.
"The media has somewhat tarnished the subprime industry and all the employees, and portrayed them as being dishonest," she said. "We're not dishonest. Not everybody was a bad borrower. Not every company was a bad lender."
Hopes of hanging on to jobs quickly dashed
Mysti said she and many other employees who survived the early rounds of layoffs at New Century thought they'd be able to ride out the bad times even after the firm stopped taking new mortgage applications in March of last year and filed for bankruptcy in April.
"We were New Century. We were a large corporation. We were the No. 2 subprime lender in the industry," she recalled. "You figured someone would come in and want to invest and take it over."
But the potential buyers soon disappeared as did the remaining jobs. She and her co-workers got word on May 3 that they were being laid off, effective the next day.
Kent's story is similar. Throughout last summer, he tried to keep up the morale of the 150 sales people he had reporting to him. Friedman Billings had a deal to sell First NLC Financial Services to Sun Capital Partners, the private capital firm that had sold it to them only two years before. So there was hope. Or so he thought.
"We knew we're going to lose money, we were just going to try to not hemorrhage," he said. "That's the message we all had to deliver to our troops -- Sun Capital is going to come in, they're behind us, they wouldn't be buying us if they didn't think we could ride out the storm," Kent recalled.
But by August it was apparent that deal was no longer going to happen, and he too was laid off.
For some, getting laid-off is better than still working
The Copes are just two of many in Orange County, formerly the center of the nation's subprime lending industry, now trying to move on. Nearly 9,000 jobs have been lost there in the past year, with more than 4,000 alone in Irvine, where New Century was based.
But the damage extends far beyond those like the Copes who lost their jobs.
"You can't run into someone who isn't impacted by what's going on," said Kent. "It's very expensive to live in Orange County, and you pay a lot for your home and you can't get what it's worth now."
Some of their former colleagues found jobs with other lenders, only to get laid off again when those firms closed up. Kent said some of the sales people he knows who still have jobs are actually the worst off.
"They may be employed by a company for months and months, but they can't close a deal," he said. "They've got the borrowers, but unless that thing is pure gold, it isn't made. It's a commission business. They're to the point frankly where they would rather get laid-off so they can go collect unemployment than be employed and make no money."
The subprime industry in Orange County was a close-knit close cluster of lenders. The industry rapidly expanded as executives at one firm would strike out on their own and setup shop nearby. But the industry fell apart even more quickly.
The Copes and their colleagues tracked the collapse through rumors and Web sites, such as lenderimplode.com.
"You kept looking everyday to see if your company was on there or not," said Kent. "It seemed like every day there was a company going under."
"You know you could take a roller coaster ride down," he said. "But you never envisioned it could be a free fall."
Welcome to subprime's ghost town
10 resumes a day, no takers
When it gets bad, it is a freefall.
Careers vanish after subprime 'free fall'
Kent and Mysti Cope were well-paid executives at subprime lenders who never thought the industry could disappear overnight. Now they're just trying to get by.
EMAIL | PRINT | DIGG | RSS Subscribe to Economy
feed://rss.cnn.com/rss/money_news_economy.rss
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close) By Chris Isidore, CNNMoney.com senior writer
March 31, 2008: 5:30 AM EDT
Mysti and Kent Cope met when both worked at subprime lender New Century. Both lost their jobs last year when the industry collapsed.
Getting back in the job game
More Videos
--------------------------------------------------------------------------------
Homes for sale - cheap
More VideosPhotos
America's Money: In their own words
Everyday folks tell their stories about hard economic times. Check back frequently for new stories.
View photos
Current Mortgage Rates
Type Overall avgs
30 yr fixed mtg 5.75%
15 yr fixed mtg 5.27%
30 yr fixed jumbo mtg 7.16%
5/1 ARM 5.67%
5/1 jumbo ARM 6.36%
Find personalized rates:
Fed up with the Fed
What would you ask Big Oil?
Color therapy to beat recession blues
Paulson offers sweeping rule changes
Careers vanish after subprime 'free fall'
SAN CLEMENTE, Calif. (CNNMoney.com) -- Kent and Mysti Cope met and fell in love working for one of the nation's top subprime lenders. Now, their life has been turned upside down after the sudden implosion of the subprime mortgage industry.
Mysti was one of the last people out the door at New Century Financial, once the nation's No. 2 subprime lender. She had been in charge of e-commerce customer service with dozens of employees reporting to her. It was at New Century where the Copes met in 2000.
Kent worked for several of the firms that helped give birth to the industry, which specializes in making loans to people with less-than-perfect credit, in the 1990s. He has been out of work since August when he was laid off by Friedman, Billings, Ramsey Group (FBR) unit First NLC Financial Services.
"We're still both in shock that it could go from something so good to so bad so quick," said Kent, 59. "New Century in 60 days went from top of the heap to out of business."
The two didn't say exactly how much money they made at their last jobs but Kent admitted they each had six-figure incomes.
Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month.
Only $1,800 to cover $10,000 in bills
Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.
Kent estimates the mountainside home in San Clemente, Calif., which they bought in 2005, is worth 20% less than it was a year ago. And in the current market, he said he's not sure he could sell it for even that amount.
"We've used up most of our reserves, cashed in her 401K," said Kent. "We're going Mach 1 into a wall. When we run into it, then we've got to decide what to do next."
Despite their financial problems, the Copes have worked hard to protect their credit rating, staying current on bills. And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example. But the couple also has learned that it didn't need everything it used to spend money on.
"We used to eat out a lot. Now we are the leftover king and queen," said Kent.
Since he lost his job, Kent has gotten a real estate license and is trying to start a business selling the rapidly increasing inventory of foreclosed homes in Orange County, Calif. Mysti is trying to build an online business selling jewelry and beachwear, some of which she designs herself.
"Is it scary? Yeah," said Kent. "How long do you have to hold on before it starts to turn around? If anything, that piece of it is the most unnerving for us."
For Mysti, 37, all her efforts to find work since she lost her job last May have been futile. She said she believes the attention given to subprime borrowers who have run into trouble paying their mortgages work against her and other former colleagues. It's almost like having "Enron" on your resume.
"The media has somewhat tarnished the subprime industry and all the employees, and portrayed them as being dishonest," she said. "We're not dishonest. Not everybody was a bad borrower. Not every company was a bad lender."
Hopes of hanging on to jobs quickly dashed
Mysti said she and many other employees who survived the early rounds of layoffs at New Century thought they'd be able to ride out the bad times even after the firm stopped taking new mortgage applications in March of last year and filed for bankruptcy in April.
"We were New Century. We were a large corporation. We were the No. 2 subprime lender in the industry," she recalled. "You figured someone would come in and want to invest and take it over."
But the potential buyers soon disappeared as did the remaining jobs. She and her co-workers got word on May 3 that they were being laid off, effective the next day.
Kent's story is similar. Throughout last summer, he tried to keep up the morale of the 150 sales people he had reporting to him. Friedman Billings had a deal to sell First NLC Financial Services to Sun Capital Partners, the private capital firm that had sold it to them only two years before. So there was hope. Or so he thought.
"We knew we're going to lose money, we were just going to try to not hemorrhage," he said. "That's the message we all had to deliver to our troops -- Sun Capital is going to come in, they're behind us, they wouldn't be buying us if they didn't think we could ride out the storm," Kent recalled.
But by August it was apparent that deal was no longer going to happen, and he too was laid off.
For some, getting laid-off is better than still working
The Copes are just two of many in Orange County, formerly the center of the nation's subprime lending industry, now trying to move on. Nearly 9,000 jobs have been lost there in the past year, with more than 4,000 alone in Irvine, where New Century was based.
But the damage extends far beyond those like the Copes who lost their jobs.
"You can't run into someone who isn't impacted by what's going on," said Kent. "It's very expensive to live in Orange County, and you pay a lot for your home and you can't get what it's worth now."
Some of their former colleagues found jobs with other lenders, only to get laid off again when those firms closed up. Kent said some of the sales people he knows who still have jobs are actually the worst off.
"They may be employed by a company for months and months, but they can't close a deal," he said. "They've got the borrowers, but unless that thing is pure gold, it isn't made. It's a commission business. They're to the point frankly where they would rather get laid-off so they can go collect unemployment than be employed and make no money."
The subprime industry in Orange County was a close-knit close cluster of lenders. The industry rapidly expanded as executives at one firm would strike out on their own and setup shop nearby. But the industry fell apart even more quickly.
The Copes and their colleagues tracked the collapse through rumors and Web sites, such as lenderimplode.com.
"You kept looking everyday to see if your company was on there or not," said Kent. "It seemed like every day there was a company going under."
"You know you could take a roller coaster ride down," he said. "But you never envisioned it could be a free fall."
Welcome to subprime's ghost town
10 resumes a day, no takers
Monday, March 24, 2008
March 24 DOW
Last monday Fed saved BSC. From then 11650 to 12548, it is a 900 points rally in 5 days. All media is saying "buy stocks". Dick Bove is saying "Buy Financials".
In one week the mood has totally changed.
At this point, i feel like i should go ahead and buy.
But i will wait for a fall to pick some tech. csco, intc, msft & qqqq.
In one week the mood has totally changed.
At this point, i feel like i should go ahead and buy.
But i will wait for a fall to pick some tech. csco, intc, msft & qqqq.
Thursday, March 20, 2008
ONE DAY UP ANOTHER DAY DOWN
The market is so volatile.
Mar 18 Up 410
Mar 19 Dn 290
May 20 Up 200.
Today (Mar 20) is options expiry.
As for my portfolio, except for GE, other positions look good.
What should i do during the next dip? Buy, sell or keep quiet.
If you buy, then is it possible that the purchase becomes a PFE kind?
not sure.
Mar 18 Up 410
Mar 19 Dn 290
May 20 Up 200.
Today (Mar 20) is options expiry.
As for my portfolio, except for GE, other positions look good.
What should i do during the next dip? Buy, sell or keep quiet.
If you buy, then is it possible that the purchase becomes a PFE kind?
not sure.
Tuesday, March 18, 2008
FED BONANZA
Mon 17 morning - World market down 5%. DOW supposed to open at 11500.
Sunday BSC was sold at $2 after closing at 30 on friday.
Tue 18 evening DOW closes up 50 on Mon and 420 on Tue. LEH and GS down to 20 and 145
on Mon close up to 41 and 175 on Tuesday.
SO when and how is the next leg down going to be?
Sunday BSC was sold at $2 after closing at 30 on friday.
Tue 18 evening DOW closes up 50 on Mon and 420 on Tue. LEH and GS down to 20 and 145
on Mon close up to 41 and 175 on Tuesday.
SO when and how is the next leg down going to be?
Monday, March 17, 2008
BSC causes Joe Lewis to lose a billion
CREDIT CRISIS HITS WALL STREET
A Stake Through the Heart
Bear's Biggest Holders
May Have Little Choice
But to Cut Their Losses
By CASSELL BRYAN-LOW and KATE KELLY
March 17, 2008; Page C2
British billionaire Joseph Lewis made his fortune gambling on currencies. His recent investment in Bear Stearns Cos. has turned out to be a disastrous bet.
The elusive septuagenarian is one the biggest losers from the New York investment bank's problems. In just a few months, he has paper losses of about $800 million on his roughly 9.6% stake in Bear, whose share price has cratered in recent days.
A small cadre of investors, often considered some of the best in the business, own big stakes in Bear that aren't looking good. A number of these shareholders are the type of investors who ordinarily would take a hard line in a sale, demanding a higher price. But with Bear on the brink, they may have little choice.
Among the stakeholders: James Barrow, a Dallas money manager who runs the firm Barrow, Hanley, Mewhinney & Strauss Inc., is the single biggest investor, with a 9.95% stake, according to recent regulatory filings. Bear Stearns Chairman James Cayne, who stepped down as chief executive in January amid criticisms by some investors that he was too hands-off when the mortgage mess unfolded, holds a stake just under 5%. So does activist investor Bruce Sherman, the CEO of Naples, Fla., money-manager Private Capital Management Inc., a unit of Legg Mason Inc., recent regulatory filings show.
RELATED ARTICLES
• J.P. Morgan Rescues Bear Stearns
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• Bear Stearns Discovers Risk of Its Hedge-Fund Business
03/17/2008
• Another Source of Quick Cash Dries Up
03/17/2008
• In a Crisis, It's Dimon Once Again
03/17/2008
• Bear's Biggest Holders May Have Little Choice but to Cut Their Losses
03/17/2008
• Fed Cuts Rates, Extends Loans to Calm Markets
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• Breakingviews: Stern Warning All Around
03/17/2008
• J.P. Morgan Statement on Deal
• MarketBeat: The Bear Stearns Fallout
• Deal Journal: A Short History of Troubled Investment Bank SalesMr. Sherman, who persuaded the media company Knight Ridder Inc. to put itself up for sale in 2005, has taken a more active stance with Bear in recent months, say people familiar with the matter. He closely questioned Bear lead director Vincent Tese about the investment bank's problems last summer and made his dissatisfaction with Mr. Cayne clear to Bear officials in the weeks preceding Mr. Cayne's early-January resignation as CEO, these people said. Mr. Sherman's firm held 5.5 million Bear shares as of Dec. 31, 2007, or a 4.8% stake. Those 5.5 million shares at Friday's close were valued roughly at about $166.5 million, down 80% from a year ago.
Mr. Sherman was unavailable to comment, a spokesman said yesterday. Mr. Lewis was unavailable to comment, a spokesman said. An assistant in Mr. Cayne's Bear office said he was in a meeting and unavailable for comment. Mr. Barrow didn't respond to a request for comment.
Mr. Lewis made his fortune as a currency trader, once amassing a 30% stake in auctioneer Christie's International PLC, and has spent the past decade investing in an array of businesses, including real estate, oil and gas, and sports. He now lives in the tony Lyford Cay development in the Bahamas. He got involved with Bear first as a client and became a major investor last year.
Mr. Lewis long has been a client of Kurt Butenhoff, one of Bear Stearns's heavy hitters in private-client services. Mr. Butenhoff brought the relationship with him to Bear from Salomon Bros., where Mr. Butenhoff was a high-net-worth broker in the early 1990s.
Mr. Lewis began rapidly building his stake in Bear Stearns last summer, shortly after the bank announced that two internal hedge funds had imploded. In December, his stake rose to just under 10% from about 7% when Bear's stock price fell below $110, forcing him to make good on an options trade he had made with another party.
Mr. Lewis could have sold his obligation to buy and washed his hands of an unlucky trade. Instead, he chose to exercise his options, filings show, acquiring hundreds of thousands of new shares. He owns more than 11 million Bear Stearns shares, according to a December regulatory filing.
Friday, Bear's shares fell 47% to a nine-year low of $30 in New York Stock Exchange composite trading after the Federal Reserve and J.P. Morgan Chase & Co. stepped in to keep the firm afloat following a severe cash crunch. It doesn't appear from reviews of regulatory filings that Messrs. Sherman, Cayne, Barrow and Lewis have sold shares in recent weeks.
The son of a cafe owner in London's East End, Mr. Lewis started work there and later expanded the family business to create a small empire of theme restaurants. He acquired the nickname "the boxer" in part because his name is similar to boxing legend Joe Louis and also because of his shrewd approach to business.
Mr. Lewis's recent endeavors have included developments in central Florida, where he owns Isleworth and another gated community. About six years ago, Mr. Lewis purchased a stake in Tottenham Hotspur PLC, a soccer club based in northeast London. A keen golfer, Mr. Lewis hosts the Tavistock Cup tournament and has befriended golf star Tiger Woods.
A Stake Through the Heart
Bear's Biggest Holders
May Have Little Choice
But to Cut Their Losses
By CASSELL BRYAN-LOW and KATE KELLY
March 17, 2008; Page C2
British billionaire Joseph Lewis made his fortune gambling on currencies. His recent investment in Bear Stearns Cos. has turned out to be a disastrous bet.
The elusive septuagenarian is one the biggest losers from the New York investment bank's problems. In just a few months, he has paper losses of about $800 million on his roughly 9.6% stake in Bear, whose share price has cratered in recent days.
A small cadre of investors, often considered some of the best in the business, own big stakes in Bear that aren't looking good. A number of these shareholders are the type of investors who ordinarily would take a hard line in a sale, demanding a higher price. But with Bear on the brink, they may have little choice.
Among the stakeholders: James Barrow, a Dallas money manager who runs the firm Barrow, Hanley, Mewhinney & Strauss Inc., is the single biggest investor, with a 9.95% stake, according to recent regulatory filings. Bear Stearns Chairman James Cayne, who stepped down as chief executive in January amid criticisms by some investors that he was too hands-off when the mortgage mess unfolded, holds a stake just under 5%. So does activist investor Bruce Sherman, the CEO of Naples, Fla., money-manager Private Capital Management Inc., a unit of Legg Mason Inc., recent regulatory filings show.
RELATED ARTICLES
• J.P. Morgan Rescues Bear Stearns
03/17/2008
• Bear Stearns Discovers Risk of Its Hedge-Fund Business
03/17/2008
• Another Source of Quick Cash Dries Up
03/17/2008
• In a Crisis, It's Dimon Once Again
03/17/2008
• Bear's Biggest Holders May Have Little Choice but to Cut Their Losses
03/17/2008
• Fed Cuts Rates, Extends Loans to Calm Markets
03/17/2008
• Breakingviews: Stern Warning All Around
03/17/2008
• J.P. Morgan Statement on Deal
• MarketBeat: The Bear Stearns Fallout
• Deal Journal: A Short History of Troubled Investment Bank SalesMr. Sherman, who persuaded the media company Knight Ridder Inc. to put itself up for sale in 2005, has taken a more active stance with Bear in recent months, say people familiar with the matter. He closely questioned Bear lead director Vincent Tese about the investment bank's problems last summer and made his dissatisfaction with Mr. Cayne clear to Bear officials in the weeks preceding Mr. Cayne's early-January resignation as CEO, these people said. Mr. Sherman's firm held 5.5 million Bear shares as of Dec. 31, 2007, or a 4.8% stake. Those 5.5 million shares at Friday's close were valued roughly at about $166.5 million, down 80% from a year ago.
Mr. Sherman was unavailable to comment, a spokesman said yesterday. Mr. Lewis was unavailable to comment, a spokesman said. An assistant in Mr. Cayne's Bear office said he was in a meeting and unavailable for comment. Mr. Barrow didn't respond to a request for comment.
Mr. Lewis made his fortune as a currency trader, once amassing a 30% stake in auctioneer Christie's International PLC, and has spent the past decade investing in an array of businesses, including real estate, oil and gas, and sports. He now lives in the tony Lyford Cay development in the Bahamas. He got involved with Bear first as a client and became a major investor last year.
Mr. Lewis long has been a client of Kurt Butenhoff, one of Bear Stearns's heavy hitters in private-client services. Mr. Butenhoff brought the relationship with him to Bear from Salomon Bros., where Mr. Butenhoff was a high-net-worth broker in the early 1990s.
Mr. Lewis began rapidly building his stake in Bear Stearns last summer, shortly after the bank announced that two internal hedge funds had imploded. In December, his stake rose to just under 10% from about 7% when Bear's stock price fell below $110, forcing him to make good on an options trade he had made with another party.
Mr. Lewis could have sold his obligation to buy and washed his hands of an unlucky trade. Instead, he chose to exercise his options, filings show, acquiring hundreds of thousands of new shares. He owns more than 11 million Bear Stearns shares, according to a December regulatory filing.
Friday, Bear's shares fell 47% to a nine-year low of $30 in New York Stock Exchange composite trading after the Federal Reserve and J.P. Morgan Chase & Co. stepped in to keep the firm afloat following a severe cash crunch. It doesn't appear from reviews of regulatory filings that Messrs. Sherman, Cayne, Barrow and Lewis have sold shares in recent weeks.
The son of a cafe owner in London's East End, Mr. Lewis started work there and later expanded the family business to create a small empire of theme restaurants. He acquired the nickname "the boxer" in part because his name is similar to boxing legend Joe Louis and also because of his shrewd approach to business.
Mr. Lewis's recent endeavors have included developments in central Florida, where he owns Isleworth and another gated community. About six years ago, Mr. Lewis purchased a stake in Tottenham Hotspur PLC, a soccer club based in northeast London. A keen golfer, Mr. Lewis hosts the Tavistock Cup tournament and has befriended golf star Tiger Woods.
BEAR STERN COLLAPSES and DOW opens steady
Bearn stern collapses and was bought by JPM for $2 yesterday.
World market were down 5%.
DOW futures point to a pretty low open. DOW opens down 150 but by
10:30 it is down only 60, a meagre .5%
MARCH 17 2008
Markets Last Change
Dow Jones 11,894.10 -56.99 / -0.48%
Nasdaq 2,184.06 -28.43 / -1.28%
S&P 500 1,272.90 -15.24 / -1.18%
World market were down 5%.
DOW futures point to a pretty low open. DOW opens down 150 but by
10:30 it is down only 60, a meagre .5%
MARCH 17 2008
Markets Last Change
Dow Jones 11,894.10 -56.99 / -0.48%
Nasdaq 2,184.06 -28.43 / -1.28%
S&P 500 1,272.90 -15.24 / -1.18%
Tuesday, March 11, 2008
WHEN THE MARKET IS DOWN BIG ON FRIDAY
03/07/2008 12:41:48 Sold 4 GEDT @ 1.57 619.99 $19,179.09
03/07/2008 13:56:22 Sold Short 100 COP @ 78.1801 7,812.92 $26,992.01
03/07/2008 14:26:26 Bought 3 JNJOL @ 0.35 -112.25 $26,879.76
03/07/2008 14:58:52 Sold Short 200 BX @ 14.4 2,874.96 $29,754.72
03/07/2008 15:11:33 Bought 2 SFBOA @ 3.6 -726.50 $29,028.22
03/07/2008 15:23:02 Sold Short 100 GE @ 32.45 3,239.96 $32,268.18
03/07/2008 15:26:27 Sold 5 PFECX @ 0.1 41.24 $32,309.42
03/10/2008 10:13:07 Bought 1 COPOP @ 3.35 -340.75 $31,968.67
03/11/2008 4 GEDT 860 (-232)
03/11/2008 100 COP (-132)
03/11/2008 200 BX (-358)
03/11/2008 SFBOA (-320)
03/11/2008 GE (-100)
No action on Friday would have given $1200
03/07/2008 13:56:22 Sold Short 100 COP @ 78.1801 7,812.92 $26,992.01
03/07/2008 14:26:26 Bought 3 JNJOL @ 0.35 -112.25 $26,879.76
03/07/2008 14:58:52 Sold Short 200 BX @ 14.4 2,874.96 $29,754.72
03/07/2008 15:11:33 Bought 2 SFBOA @ 3.6 -726.50 $29,028.22
03/07/2008 15:23:02 Sold Short 100 GE @ 32.45 3,239.96 $32,268.18
03/07/2008 15:26:27 Sold 5 PFECX @ 0.1 41.24 $32,309.42
03/10/2008 10:13:07 Bought 1 COPOP @ 3.35 -340.75 $31,968.67
03/11/2008 4 GEDT 860 (-232)
03/11/2008 100 COP (-132)
03/11/2008 200 BX (-358)
03/11/2008 SFBOA (-320)
03/11/2008 GE (-100)
No action on Friday would have given $1200
New post. DOW after Fed cuts in previous instances
Six months after the first rate cut
Stocks are sharply lower since the Fed began its recent series of rate cuts in September, making this the worst reaction to an easing cycle since the 1950s.
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See all CNNMoney.com RSS FEEDS (close) By Alexandra Twin, CNNMoney.com senior writer
Last Updated: March 11, 2008: 7:05 AM EDT
Recession Watch 2008
Slower growth, but no recession - forecast
Jobs get tossed out of stores
Job losses: Worst in 5 years
Consumer confidence lowest on record
House Democrats vow new push on economy
Quick Vote
What worries you more about the economy?
Rising energy and food pricesWeakening job and housing marketsConcerned equally about inflation and slow growthNot worried: The economy is fine or View resultsNot your 1980's stagflation
More Videos
NEW YORK (CNNMoney.com) -- Despite five interest rate cuts in the past six months, Wall Street has remained impervious to the Federal Reserve's wooing, with investors taking a "thanks, but..." attitude to Ben Bernanke & Co.'s attempt to recharge the economy and stock market.
Since September, the central bank has lowered its federal funds rate, a key overnight bank lending rate, to 3% from 5.25%. This included a 75 basis point emergency cut in January. There are 100 basis points in one percentage point.
Federal Reserve policy-makers will meet again on March 18 and are expected to cut rates by at least another 50 basis points, to 2.5%. Coincidentally, the Fed's next meeting also marks the six-month anniversary of the first cut in this easing cycle.
But before you order your flowers and candy to send to your favorite central banker, it's worth pointing out that the stimulus from the Fed has done little for the stock market.
Since the first rate cut on Sept. 18 of last year, through Monday's close, the S&P 500 is down 16.2%. That makes this the worst performance for the market following a series of rate cuts since the 1950s, according to Standard & Poor's research. And that's taking into account other times when the economy was in a recession, as may be the case now.
Wall Street after rate cuts
S&P chief investment strategist Sam Stovall looked at where the market stood six months after the Fed initiated a series of interest-rate cuts, going back to the 1954 cycle.
Stovall found that the S&P 500 was in positive territory 7 of 11 times, for an average gain of 12.3% overall and a gain of 7.6% since 1980. For the years before 1980, Stovall looked at cuts to the discount rate and for the years after that, he looked at cuts to the federal funds rate.
How about the Nasdaq? Stovall looked at the tech average going back to its inception in 1971, again switching from the discount rate to the fed funds rate after 1980. On average, the Nasdaq rose 4 out of 7 times, for an average of 15.6% overall, and 11.5% since 1980.
Since the first rate cut last year, through Monday's close, the Nasdaq is down 18.2%. That's the worst response since the 1990-1991 recession, when six months after the first rate cut, the Nasdaq was down 22.6%.
As for the Dow, Ned Davis Research looked at statistics going back to 1921 and found that the Dow also posted double-digit gains, on average, six months after the first in a series of rate cuts. The Dow rose 13 out of 18 times, for an average of 11.7%.
Since the first rate cut last year, through Monday's close, the Dow is down 14.6%. That's the worst response since 1932, when the Dow had posted a loss of 37.5% at the six-month mark.
Fed loans not easing credit crunch
One of the reasons stocks haven't seen a 'Fed bounce' is that "although the Fed has been cutting rates for months, the economy hasn't started coming back yet," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
In fact, the economy has deteriorated since the September rate cut. The most recent reading on fourth-quarter GDP showed anemic growth of 0.6% and the first quarter could show a contraction in growth, some economists say. Employers made the biggest monthly job cuts in February in five years. And pretty much every housing market report shows falling prices, lower sales and rising rates of foreclosure.
Did we mention that quarterly earnings are at a five-year low and that the dollar is plunging? And that oil and gold prices are at or just below record highs?
All of this speaks to the possibility that the Fed may have waited too long to start cutting rates, therefore muting the impact, said Scott Armiger, portfolio manager at Christiana Bank & Trust.
He said that stocks initially bounced a bit after the first cut, leading to record highs for the Dow and S&P 500 in early October and to a multi-year high for the Nasdaq around the same time. Stocks also got a bit of a jolt after the Jan. 22 surprise rate cut.
But beyond those short spurts, stocks have been on the slide.
"We didn't get a real Fed bounce because it was just too late," Armiger said. "By the time they started cutting, the consumer was already tapped out."
Meanwhile, banks haven't been using the extra liquidity as a means of expanding their borrowing capabilities.
"The problem is not one of liquidity, but solvency," said Ryan Atkinson, market analyst at Balestra Capital. "The Fed is providing liquidity, but assets are overvalued. With the amount of credit outstanding, real economic activity cannot support the cash flows needed to service that debt."
So what really might be needed before the market reacts favorably to the Fed cuts is more time.
Play it like it's 2002
Along those lines, the 2008 stock reaction to the Fed cuts could be similar to what happened in 2001-2002, when the Fed cut rates aggressively to stimulate the economy amid the end of the tech boom, 9/11 and the 2001 recession. The stock reaction to that was delayed, but ultimately positive.
"There's no doubt that we're in a financial crisis," said Bill Stone, chief investment strategist at PNC Financial Services Group. "But its also reasonable to figure that we could see a turnaround like in 2002."
The Fed cut rates 11 times in 2001, from 6.5% to 1.75%. But six months after the first rate cut, the S&P 500 was down 3.6%, the Nasdaq was down 6.2% and the Dow was down 4.3%, with Wall Street smack in the middle of a three-year bear market.
Stocks didn't bottom until October 2002 and didn't see an up year until 2003, a big year on Wall Street in which the Nasdaq rose more than 50% and the Dow and S&P 500 each gained more than 25%.
Stone's not saying that stocks are in for a year like that next year, as problems in the housing and financial markets are bound to linger. But eventually, he said, the markets start discounting the bad numbers and looking forward. And that will coincide with signs of a bottoming in the economy and other indications of a turnaround, all of which will be bolstered by the Fed's cuts.
So while the market may not be feeling any better six months after the first rate cut, it may be a different story another year from now.
Stocks are sharply lower since the Fed began its recent series of rate cuts in September, making this the worst reaction to an easing cycle since the 1950s.
EMAIL | PRINT | DIGG | RSS Subscribe to Markets
feed://rss.cnn.com/rss/money_markets.rss
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close) By Alexandra Twin, CNNMoney.com senior writer
Last Updated: March 11, 2008: 7:05 AM EDT
Recession Watch 2008
Slower growth, but no recession - forecast
Jobs get tossed out of stores
Job losses: Worst in 5 years
Consumer confidence lowest on record
House Democrats vow new push on economy
Quick Vote
What worries you more about the economy?
Rising energy and food pricesWeakening job and housing marketsConcerned equally about inflation and slow growthNot worried: The economy is fine or View resultsNot your 1980's stagflation
More Videos
NEW YORK (CNNMoney.com) -- Despite five interest rate cuts in the past six months, Wall Street has remained impervious to the Federal Reserve's wooing, with investors taking a "thanks, but..." attitude to Ben Bernanke & Co.'s attempt to recharge the economy and stock market.
Since September, the central bank has lowered its federal funds rate, a key overnight bank lending rate, to 3% from 5.25%. This included a 75 basis point emergency cut in January. There are 100 basis points in one percentage point.
Federal Reserve policy-makers will meet again on March 18 and are expected to cut rates by at least another 50 basis points, to 2.5%. Coincidentally, the Fed's next meeting also marks the six-month anniversary of the first cut in this easing cycle.
But before you order your flowers and candy to send to your favorite central banker, it's worth pointing out that the stimulus from the Fed has done little for the stock market.
Since the first rate cut on Sept. 18 of last year, through Monday's close, the S&P 500 is down 16.2%. That makes this the worst performance for the market following a series of rate cuts since the 1950s, according to Standard & Poor's research. And that's taking into account other times when the economy was in a recession, as may be the case now.
Wall Street after rate cuts
S&P chief investment strategist Sam Stovall looked at where the market stood six months after the Fed initiated a series of interest-rate cuts, going back to the 1954 cycle.
Stovall found that the S&P 500 was in positive territory 7 of 11 times, for an average gain of 12.3% overall and a gain of 7.6% since 1980. For the years before 1980, Stovall looked at cuts to the discount rate and for the years after that, he looked at cuts to the federal funds rate.
How about the Nasdaq? Stovall looked at the tech average going back to its inception in 1971, again switching from the discount rate to the fed funds rate after 1980. On average, the Nasdaq rose 4 out of 7 times, for an average of 15.6% overall, and 11.5% since 1980.
Since the first rate cut last year, through Monday's close, the Nasdaq is down 18.2%. That's the worst response since the 1990-1991 recession, when six months after the first rate cut, the Nasdaq was down 22.6%.
As for the Dow, Ned Davis Research looked at statistics going back to 1921 and found that the Dow also posted double-digit gains, on average, six months after the first in a series of rate cuts. The Dow rose 13 out of 18 times, for an average of 11.7%.
Since the first rate cut last year, through Monday's close, the Dow is down 14.6%. That's the worst response since 1932, when the Dow had posted a loss of 37.5% at the six-month mark.
Fed loans not easing credit crunch
One of the reasons stocks haven't seen a 'Fed bounce' is that "although the Fed has been cutting rates for months, the economy hasn't started coming back yet," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
In fact, the economy has deteriorated since the September rate cut. The most recent reading on fourth-quarter GDP showed anemic growth of 0.6% and the first quarter could show a contraction in growth, some economists say. Employers made the biggest monthly job cuts in February in five years. And pretty much every housing market report shows falling prices, lower sales and rising rates of foreclosure.
Did we mention that quarterly earnings are at a five-year low and that the dollar is plunging? And that oil and gold prices are at or just below record highs?
All of this speaks to the possibility that the Fed may have waited too long to start cutting rates, therefore muting the impact, said Scott Armiger, portfolio manager at Christiana Bank & Trust.
He said that stocks initially bounced a bit after the first cut, leading to record highs for the Dow and S&P 500 in early October and to a multi-year high for the Nasdaq around the same time. Stocks also got a bit of a jolt after the Jan. 22 surprise rate cut.
But beyond those short spurts, stocks have been on the slide.
"We didn't get a real Fed bounce because it was just too late," Armiger said. "By the time they started cutting, the consumer was already tapped out."
Meanwhile, banks haven't been using the extra liquidity as a means of expanding their borrowing capabilities.
"The problem is not one of liquidity, but solvency," said Ryan Atkinson, market analyst at Balestra Capital. "The Fed is providing liquidity, but assets are overvalued. With the amount of credit outstanding, real economic activity cannot support the cash flows needed to service that debt."
So what really might be needed before the market reacts favorably to the Fed cuts is more time.
Play it like it's 2002
Along those lines, the 2008 stock reaction to the Fed cuts could be similar to what happened in 2001-2002, when the Fed cut rates aggressively to stimulate the economy amid the end of the tech boom, 9/11 and the 2001 recession. The stock reaction to that was delayed, but ultimately positive.
"There's no doubt that we're in a financial crisis," said Bill Stone, chief investment strategist at PNC Financial Services Group. "But its also reasonable to figure that we could see a turnaround like in 2002."
The Fed cut rates 11 times in 2001, from 6.5% to 1.75%. But six months after the first rate cut, the S&P 500 was down 3.6%, the Nasdaq was down 6.2% and the Dow was down 4.3%, with Wall Street smack in the middle of a three-year bear market.
Stocks didn't bottom until October 2002 and didn't see an up year until 2003, a big year on Wall Street in which the Nasdaq rose more than 50% and the Dow and S&P 500 each gained more than 25%.
Stone's not saying that stocks are in for a year like that next year, as problems in the housing and financial markets are bound to linger. But eventually, he said, the markets start discounting the bad numbers and looking forward. And that will coincide with signs of a bottoming in the economy and other indications of a turnaround, all of which will be bolstered by the Fed's cuts.
So while the market may not be feeling any better six months after the first rate cut, it may be a different story another year from now.
WHENVER the market falls 5 to 10% in a space of 2 weeks....
REMEMBER
The fed always comes to the rescue and the markets go up atleast in the short term
The fed always comes to the rescue and the markets go up atleast in the short term
MARCH 11 2008 Fed adds $200b liquidity and DOW jumps 350
March 9 Sunday
My short options + long stocks were down $3000 in the last 2 days and i was wonder how low the market is going to go?
In the past 10 days market has been down from 1381 to 1273 (8% down) and especially last week was brutal.
10-Mar-08 1,293.16 1,295.01 1,272.66 1,273.37 4,261,240,000 1,273.37
7-Mar-08 1,301.53 1,313.24 1,282.43 1,293.37 4,565,410,000 1,293.37
6-Mar-08 1,332.20 1,332.20 1,303.42 1,304.34 4,323,460,000 1,304.34
5-Mar-08 1,327.69 1,344.19 1,320.22 1,333.70 4,277,710,000 1,333.70
4-Mar-08 1,329.58 1,331.03 1,307.39 1,326.75 4,757,180,000 1,326.75
3-Mar-08 1,330.45 1,335.13 1,320.04 1,331.34 4,117,570,000 1,331.34
29-Feb-08 1,364.07 1,364.07 1,325.42 1,330.63 4,426,730,000 1,330.63
28-Feb-08 1,378.16 1,378.16 1,363.16 1,367.68 3,938,580,000 1,367.68
27-Feb-08 1,378.95 1,388.34 1,372.00 1,380.02 3,904,700,000 1,380.02
26-Feb-08 1,371.76 1,387.34 1,363.29 1,381.29 4,096,060,000 1,381.29
Last four months starting Nov, was a down month.
Mar-08 1,330.45 1,344.19 1,272.66 1,273.37 5,093,968,300 1,273.37
Feb-08 1,378.60 1,396.02 1,316.75 1,330.63 4,148,143,000 1,330.63
Jan-08 1,467.97 1,471.77 1,270.05 1,378.55 4,925,982,300 1,378.55
Dec-07 1,479.63 1,523.57 1,435.65 1,468.36 3,363,127,500 1,468.36
Nov-07 1,545.79 1,545.79 1,406.10 1,481.14 4,317,578,500 1,481.14
Oct-07 1,527.29 1,576.09 1,489.56 1,549.38 3,477,202,100 1,549.38
Not a very good feeling on monday morning.
Tue Fed cuts and market is up huge.
MORAL: Whenver the market falls huge in a short term, Fed does something to
get it back on feet.
My short options + long stocks were down $3000 in the last 2 days and i was wonder how low the market is going to go?
In the past 10 days market has been down from 1381 to 1273 (8% down) and especially last week was brutal.
10-Mar-08 1,293.16 1,295.01 1,272.66 1,273.37 4,261,240,000 1,273.37
7-Mar-08 1,301.53 1,313.24 1,282.43 1,293.37 4,565,410,000 1,293.37
6-Mar-08 1,332.20 1,332.20 1,303.42 1,304.34 4,323,460,000 1,304.34
5-Mar-08 1,327.69 1,344.19 1,320.22 1,333.70 4,277,710,000 1,333.70
4-Mar-08 1,329.58 1,331.03 1,307.39 1,326.75 4,757,180,000 1,326.75
3-Mar-08 1,330.45 1,335.13 1,320.04 1,331.34 4,117,570,000 1,331.34
29-Feb-08 1,364.07 1,364.07 1,325.42 1,330.63 4,426,730,000 1,330.63
28-Feb-08 1,378.16 1,378.16 1,363.16 1,367.68 3,938,580,000 1,367.68
27-Feb-08 1,378.95 1,388.34 1,372.00 1,380.02 3,904,700,000 1,380.02
26-Feb-08 1,371.76 1,387.34 1,363.29 1,381.29 4,096,060,000 1,381.29
Last four months starting Nov, was a down month.
Mar-08 1,330.45 1,344.19 1,272.66 1,273.37 5,093,968,300 1,273.37
Feb-08 1,378.60 1,396.02 1,316.75 1,330.63 4,148,143,000 1,330.63
Jan-08 1,467.97 1,471.77 1,270.05 1,378.55 4,925,982,300 1,378.55
Dec-07 1,479.63 1,523.57 1,435.65 1,468.36 3,363,127,500 1,468.36
Nov-07 1,545.79 1,545.79 1,406.10 1,481.14 4,317,578,500 1,481.14
Oct-07 1,527.29 1,576.09 1,489.56 1,549.38 3,477,202,100 1,549.38
Not a very good feeling on monday morning.
Tue Fed cuts and market is up huge.
MORAL: Whenver the market falls huge in a short term, Fed does something to
get it back on feet.
Monday, January 28, 2008
iflex- What a difference a year can make
Jan 28 2008 closing price if iflex Rs 1076.
I am looking at the Oracle Press Release
Oracle Increases Price to Rs. 2,100 Per Share for i-flex Open Offer
It is 50% fall + lost interest which puts the fall as 53%.....
Oracle Press Release
Contact(s):
Bob Wynne
Oracle Corporate Communications
+1.650.506.5834
bob.wynne@oracle.com
Suramya Gupta
DSP Merrill Lynch
+1.91.22.6632.8175
suramya_gupta@ml.com
Oracle Increases Price to Rs. 2,100 Per Share for i-flex Open Offer
Last Opportunity for Shareholders Unless i-flex Share Price Goes Down
REDWOOD SHORES, Calif., 07-DEC-2006 02:05 PM Oracle today announced that it has increased to Rs. 2,100 per share including interest and has increased to approximately 35 percent the number of shares it has agreed to purchase in the pending open offer of i-flex solutions (Bombay Stock Exchange: IFLX.BO and National Stock Exchange of India: IFLX.NS). The open offer price is a 42% premium to the original price of Rs. 1,475 per share, which represents the highest price paid by Oracle for shares of i-flex.
I am looking at the Oracle Press Release
Oracle Increases Price to Rs. 2,100 Per Share for i-flex Open Offer
It is 50% fall + lost interest which puts the fall as 53%.....
Oracle Press Release
Contact(s):
Bob Wynne
Oracle Corporate Communications
+1.650.506.5834
bob.wynne@oracle.com
Suramya Gupta
DSP Merrill Lynch
+1.91.22.6632.8175
suramya_gupta@ml.com
Oracle Increases Price to Rs. 2,100 Per Share for i-flex Open Offer
Last Opportunity for Shareholders Unless i-flex Share Price Goes Down
REDWOOD SHORES, Calif., 07-DEC-2006 02:05 PM Oracle today announced that it has increased to Rs. 2,100 per share including interest and has increased to approximately 35 percent the number of shares it has agreed to purchase in the pending open offer of i-flex solutions (Bombay Stock Exchange: IFLX.BO and National Stock Exchange of India: IFLX.NS). The open offer price is a 42% premium to the original price of Rs. 1,475 per share, which represents the highest price paid by Oracle for shares of i-flex.
DEBT LOAD
2008 projected 25k
2007 30k
2006 20k
Year C H(P) Principal Paid
2008 13 109
2007 23 138
2006 0 158
2007 30k
2006 20k
Year C H(P) Principal Paid
2008 13 109
2007 23 138
2006 0 158
Saturday, January 12, 2008
Market movements
Still, there are some things we can learn by looking at past crashes. At about.com, I recently ran across Dustin Woodard's review of our 10 worst stock market crashes. Here they are:
Began
Ended
DJIA Fell ...
Change
6/17/1901
11/9/1903
57 to 31
(46%)
1/19/1906
11/15/1907
75 to 39
(49%)
11/21/1916
12/19/1917
110 to 66
(40%)
11/3/1919
8/24/1921
120 to 64
(47%)
9/3/1929
11/13/1929
381 to 199
(48%)
4/17/1930
7/8/1932
294 to 41
(86%)
3/10/1937
3/31/1938
194 to 99
(49%)
9/12/1939
4/28/1942
156 to 93
(40%)
1/11/1973
12/6/1974
1,052 to 578
(45%)
1/15/2000
10/9/2002
11,793 to 7,286
(38%)
What to learn from this
Began
Ended
DJIA Fell ...
Change
6/17/1901
11/9/1903
57 to 31
(46%)
1/19/1906
11/15/1907
75 to 39
(49%)
11/21/1916
12/19/1917
110 to 66
(40%)
11/3/1919
8/24/1921
120 to 64
(47%)
9/3/1929
11/13/1929
381 to 199
(48%)
4/17/1930
7/8/1932
294 to 41
(86%)
3/10/1937
3/31/1938
194 to 99
(49%)
9/12/1939
4/28/1942
156 to 93
(40%)
1/11/1973
12/6/1974
1,052 to 578
(45%)
1/15/2000
10/9/2002
11,793 to 7,286
(38%)
What to learn from this
Wednesday, January 9, 2008
2008 Picks
LUK
GE
QQQQ
INTC,CSCO
AMGN
HOG
C,BAC,XLF- May take long (like PFE) to come back again.
AT&T
VZ
ABB
American Funds for College Education
EFA
IVV,SPY
EWS
JOE
GE
QQQQ
INTC,CSCO
AMGN
HOG
C,BAC,XLF- May take long (like PFE) to come back again.
AT&T
VZ
ABB
American Funds for College Education
EFA
IVV,SPY
EWS
JOE
Monday, January 7, 2008
2008 Picks
LUK
GE
QQQQ
INTC,CSCO
AMGN
HOG
C,BAC,XLF- May take long (like PFE) to come back again.
AT&T
VZ
ABB
American Funds for College Education
EFA
IVV,SPY
EWS
GE
QQQQ
INTC,CSCO
AMGN
HOG
C,BAC,XLF- May take long (like PFE) to come back again.
AT&T
VZ
ABB
American Funds for College Education
EFA
IVV,SPY
EWS
Wednesday, January 2, 2008
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