Archive for September 15, 2008

Monday September 15, 2008: Down go the Banks

September 15, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , ,

Exactly two months from the widely-believed bottom, “the biggest shakeup since the Great Depression” is what it’s being called.  Today was the largest 1-day loss to the Dow in seven years.  What a total mess.  All this time, I’ve been sure no one knew what they were talking about the financials and that the bottom was already hit.  Slowly though, I’m coming to ask myself, “what were you thinking??”  Analysts had said the worst wasn’t over, but of course I didn’t believe them; I’m stubborn and always have been.  Late last night and early this morning, former employees streamed out of Boston’s Lehman building, and all other Lehman locations, with boxes and resumes in hand.  After last night’s negotiations failed, it was certain death for their jobs, and their stock, which was at 70 cents by 6:30AM, 45 cents by 7:30AM, and 18 cents at day’s close.  In less than 24 hours, the 158 year old mainstay lost 94% of its value.  Not only was the bankruptcy of Lehman Brothers the largest bankruptcy in United States history, it dwarfed all other bankruptcies in our country’s history.  Along for the hellevator ride from par to the bottomless abyss went all the financials today.  Even Merrill Lynch, which was up 30% in premarket trading because of being bought out last night for nearly twice its current value, closed the day up just 0.6% from its sorry close on Friday. 

 

Articles and blog titles that ht today had some pretty colorful titles: “Jaw-dropping day for financial markets”, “A day of reckoning”, “Meltdown in US finance system pummels stock market”, “AIG fights for survival”, “Street’s nasty surprises keep experts guessing”, “Giants fall on judgment day”, “Stocks plummet on financial meltdown”, “It’s a morose Monday for Street’s employees”, “Goodbye to easy money”, and “Broken brothers” were just a sampling.  The articles spanned all languages as today hit the entire world like a million tons of bricks. 

 

So many questions arose out of today.  What will happen to WaMu?  What will happen to the mortgage insurers now that one of the banks they insured has evaporated?  What will happen to AIG’s stock value now that the bank plans to head to the lending window?  AIG had asked for $40 billion, but word on the street is that they’ll “only” get $20 billion.  Following suit of its sibling ratings companies, Standard & Poor cut Washington Mutual’s rating to “junk” today.

 

Of the stocks I watch, here are today’s nearly unbelievable numbers:

 

Regions Financial (RF):                           Down 4% to $11.12

Community Bancorp (CBON):                    Down 4% to $4.53

Syncora Holdings (SCA):                          Down 6% to $2.39

Thornburg Mortgage (TMA):                       Down 7% to 35 cents

Triad Guarantee (TGIC):                         Down 9% to $2.1549

Financial Select Sector ETF (XLF):            Down 9% to $19.15

MBIA (MBI):                                               Down 11% to $11.45

National City (NCC):                                    Down 11% to $4.28

First Marblehead (FMD):                        Down 14% to $2.67

Centerline Holding (CHC):                          Down 14% to $2.05

Radian Group (RDN):                               Down 14% to $3.90

Citigroup (C):                                                Down 15% to $15.24

Ambac (ABK):                                             Down 16% to $6.24

PMI Group (PMI):                                        Down 17% to $2.57

Deerfield Capital (DFR):                          Down 18% to 60 cents

Bank of America (BAC):                              Down 21% to $26.55

MGIC Investment (MTG):                       Down 21% to $5.35

Washington Mutual (WM):                          Down 26% to $2.00

American International Group (AIG):  Down 60% to $4.76

 

 

My friend works for AIG.  I hope that if he loses his job it’ll be the kick in the pants he needs to get his ass to Hollywood.

 

The Dow plunged 504 points today to close below $11,000 to $10,917.  A few days ago, an analyst on TV said that “it is possible we may see $100 oil within six months”.  Within six months, buddy, how about within six days?  Crude oil fell to a 7-month low today, losing $5.47 to close at $95.71 a barrel. 

 

This experiment is going to be much longer-term than I previously thought.  Luckily I have time to wait.  I took another advance on my credit card to possibly take advantage of some of the week’s bargains, and will pay it back on Friday when my paycheck hits.

 

Later in the day, an article titled “Wall Street Losses Seen Spurring Regulatory Reform” hit CNNMoney.com.  Some are calling for another ban on short-sellers.  Alan Greenspan, in his interview this weekend, said that short-sellers are necessary to keep prices as a closer reflection of company values.  But if Washington Mutual, for example is really trading at [now less than] 17% of its book value (MarketWatch, September 11), how real are the shorties really keeping things?

Leave a comment »

Sunday September 14, 2008: Barclays deal falls through, Bank of America to buy Merrill Lynch

September 15, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , ,

This weekend was one wild ride, and it’s going to be a bloody Monday.  Barclays walked away from talks to buy Lehman Brothers today because our government wouldn’t back up the deal, and a bankruptcy filing could come by midnight.  Lehman Brothers has $128 billion in long-term debt.  Ouch.  

 

Still in the running for the bad bank, although with rapidly-fading interest, are European bank HSBC Holdings (on the New York Stock Exchange as HBC), Bank of America (BAC), and Goldman Sachs (GS).  None seems interested in Lehman’s total assets, and for some unknown reason, GS seems interested in just the part of Lehman that holds real estate.  

 

At 10PM I came home to a story out of nowhere, or at least from a place I had no idea existed, that Bank of America would acquire Merrill Lynch (MER) for $44 billion, offering $29 a share for the bank whose stock closed Friday at less than $18 a share.  Meanwhile talks stalled on Lehman, an orderly wind down of its assets is seen as the only viable solution, and AIG declared it would go to the Federal lending window to ask for its own $40 billion.  “Merrill Lynch gets $40 billion, why can’t I get $40 billion?”  Bankers are such babies.    

 

I stayed up passed midnight tonight, even though it’s a school night, just to see what if anything would magically happen to Lehman Brothers, and probably subconsciously to avoid a jar tomorrow morning.  Like I said, I have no stake in Lehman, and hopefully BAC’s purchase of MER will cause some stability in the market tomorrow.  But somehow I seriously doubt it.  By 11PM, Dow futures were down 300 points, pointing to another black Monday.  Washington Mutual message boarders were sweating themselves.

 

I’m sweating a bit too, maybe.  Earlier in the summer I set off on an experiment that soon took me over and trapped me into a world that was completely foreign to me three months earlier.  I still find it foreign, but more like Brazil after your first cop shakedown than Paris when first stepping under the Eiffel Tower foreign.  As a side, I’ve never been to either Brazil or Paris, and as good as my imagination is I know it’s not a fair substitute for the real thing, but I can imagine that looking up through the Eiffel Tower is much more pleasant than being forcefully robbed by the Brazilian police, which is the type of foreign this experiment has turned into.  And even though I know all this, and even though I sometimes can’t sleep at night in anticipation of what news will hit the next day, and despite how badly I sometimes want to nap before 4PM, I can’t seem to step away.  I’m invested, both literally and figuratively, as well as emotionally and psychologically, and sometimes even physically through a churning stomach, in the largest clusterfuck this country has ever seen.  My only solace is the thought that even if I lose it all, at least I can say that I watched it all happen.

 

But it may not be all bad.  Alan Greenspan said that the crisis our financial institutions are facing is a “once in a century event” and is by far the worst he has seen.  If he’s right, and he probably is, this is a real bottom where some serious bargains can be found and some serious money can be made- if only some pull through.  

 

By midnight no new news hit about Lehman Brothers, so I finished up another episode of Dexter and went to bed.  It seems the death day of a 158 year old bank will in fact come tomorrow.  

Leave a comment »

Saturday September 13, 2008: Barclays to buy Lehman?

September 15, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , ,

Yesterday’s talk of the Lehman’s sale to Bank of America caused the financial sector to rally, both here and in Europe, but now that the BAC deal seems to be fading away, analysts are predicting a “bloodbath” on Monday.   

 

United Kingdom bank Barclays now says that they may buy Lehman, but only the good parts.  No one wants to touch the bad parts, namely Lehman’s real estate assets.  A meeting was held today in New York about the fate of the bank and how to go about with an orderly sale, but no deal has been struck yet.  

 

Because these days it seems that the strength of the entire banking sector is so dependent on its weakest link, one option that came up in today’s New York meeting was the possibility that other Wall Street firms will inject capital into Lehman Brothers to keep it alive and therefore restore the confidence that was washed away this past week.  But with everyone hanging on by a thread, no one seems too open to this idea.  It seems at this point, liquidation is a very possible option.  But unless whatever happens is done orderly, chaos on Monday is a fair guarantee.

 

Also on Friday, Washington Mutual came out swinging at Moody’s Investors Service for downgrading the bank, stating that “the downgrade was based on instability in the sector and not an in-depth analysis of Washington Mutual’s actual standing.”  Amen WM.  WaMu’s new CEO Alan Fishman reportedly got a $7.5 million bonus on top of a $1 million salary, and starting in 2009, Fishman will get a bonus of 365% of his base salary, which basically has the guy pulling in at least $4.65 million a year after this year’s $8.5 million.  I sure hope all that money will persuade him to work overtime to get this ship turned right!  Or at least guilt him into working really, really hard.  Right now, Washington Mutual seems to be thought of as next in line to fail, or at least in a dead heat with American International Group (AIG), and Merrill Lynch (MER), so it’s going to be important for Lehman to come out soon with a plan that will stabilize the sector’s emotions.  

 

After yet another extremely volatile day yesterday, the Dow closed down 11 points to $11,422.  Crude oil closed up 31 cents to $101.18 after briefly dipping below the $100 mark for the first time in five months.  President Bush warned gas station owners against price gouging because of Hurricane Ike.  It’s still not clear how many people were stranded in the hardest hit Texan coastal towns of Galveston and Lake Charles, but many of the people being rescued are elderly and sick.  

Leave a comment »