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.
Monday, June 23, 2008
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
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(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."
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