Category Archive

The S&P

“I’ve been doing this for the last 30 years, and this ranks right up there with the crash of 1987 with regard to how my stomach feels”

—Bernard McSherry, SVP at Cuttone & Co., one of the largest floor brokerages at the New York Stock Exchange.

• Grew sevenfold from 223.92 to 1,527.46 between Dec. 4, 1987, and March 24, 2000
• Doubled to 1,565.15 on Oct. 9, 2007, from 776.76 five years earlier, but since then…
  • Financials are down 52% since the February 2007 record
  • Energy is down 27% since the May 2008 record
• Fell 4.7% September 18th to 1,156.39 
• Fell 7.6% from the 15th through the 17th
  • A couple of issues:
    • The government backstop on Bear Stearns ($29b)
    • The government seizure of AIG ($85b)
    • The bankruptcy of Lehman (+$700b)
    • The first nationwide decline in US home prices since the 30s
    • Writedowns connected to subprime (+$500b)
    • Credit Default Swaps (CDS) hit $62t in notional value in 2008, up from $144b 10 years ago
• Trading patterns suggest more losses, “so-called retracements of 50%typically precede further declines, according to some traders who look at historical prices and charts to make decisions.”

You could get some rally, but I don’t think you’ve made a low. The whole way down we’ve consistently seen lower highs and lower lows, and that pattern has yet to be broken.

—John Roque, managing director and technical analyst at Natixis Bleichroeder

• Futures rose 1.5 percent to 1,180.4 at 12:03 p.m. in London

“We’re closer to the end than the beginning. The reason fear is so good is that what idiot is left that hasn’t sold? It means there are a lot of people on the sidelines with dry powder.”

—Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, with $220 billion under management.

The private market screwed itself up and they need the government to come and help them unscrew it

—House Financial Services Committee Chairman Barney Frank

The oppressive power of the U.S. is on the decline. The world no longer has the capacity to absorb fake U.S. dollars. This is hitting back. The regime of Israel, which is the core of aggression, is nearing the end.

—Iranian President Mahmoud Ahmadinejad

Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac have all essentially collapsed. But just as at the start of the summer, economists can’t even agree whether the country is in a recession.

—DAVID LEONHARDT – NYTimes

“Investment Banks lend as if they had balance sheets”

—Robert Diamond – President of Barclays

Lehman listed liabilities of $613 billion and assets of $639 billion

Barclays buys Lehman’s core capital markets businesses for $1.75 billion

• The deal includes Lehman’s Midtown Manhattan headquarters building and two data centers, which accounts for $1.5 billion of the deal’s value
• To be approved by a judge overseeing Lehman’s bankruptcy proceedings.
• Barclays is expected to raise $1 billion in equity to support the deal

“God Save the Queen” blared over the loudspeaker

—NYTimes

“A yearlong credit squeeze culminated in the past two weeks with the bankruptcy of Lehman Brothers and the bailout out of Fannie Mae, Freddie Mac and American International Group Inc.”

—Bloomberg

intransitive verb

1. of a celestial body : to reach its highest altitude ; also : to be directly overhead.2. a: to rise to or form a summit b: to reach the highest or a climactic or decisive point

transitive verb: to bring to a head or to the highest point

For global business confidence to improve two things are needed: the U.S. housing market to bottom out and a sign that the financial turmoil is nearing an end. That won’t be until around the second quarter in 2009.

—Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo

It’s basically a disaster for tri-state real estate. Financial companies drive this region. Clearly of all the markets in New Jersey, Jersey City is the most dependent on New York City and the financial arena.

—Andy Merin, vice chairman at Cushman & Wakefield in East Rutherford, New Jersey.

Clearly all of the signals are disconcerting, but it’s going to take time to play out.

—Rosemarie McFadden, deputy mayor for economic development, Jersey City.

• Square Feet: Jersey City’s Hudson River waterfront has 17 million square feet (5.2 million square meters), more than in downtown Atlanta or Pittsburgh, according to the city’s economic development agency.

• Vacancy: 18% four years ago, 7% today

• Price Per Square Foot: $33 a square foot

• Current Revenue: $522mm, given occupancy and average $ per square foot

• Median Household Income – Jersey City: up 19% percent in 2007 from 2006, compared to 4% increase in the state average income

• Exposure: Merrill has 1,600 workers; Lehman has 1,500; AIG has about 200.

  • @ 50 square feet per a person, that equals 165k square feet, which is 1% of the total available square feet

Until the financial sector sorts itself out the economy is never going to resume normal growth,” said Ken Rogoff, former chief economist at the International Monetary Fund and now a Harvard University professor.

The federal funds rate hit 6% on Monday, triple the Fed’s target. The Fed pumped $70b into money markets through repurchase operations, the most since September 2001

—Bloomberg

The annual cost of insuring $10 million of AIG debt for five years rose to $1.9 million yesterday, equaling 19 percent of face value, according to CMA Datavision prices.

The idea that “the people” will take on and destroy “the establishment” is a utopian fantasy that corrupted the left before it corrupted the right.

…

Democracy is not average people selecting average leaders. It is average people with the wisdom to select the best prepared.

—Brooks