Posts tagged Barclays

Sunday September 21, 2008: “Paulson’s Monster” needs $700 trilllion. Moody’s questioned.

September 21, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , ,

“Paulson’s Monster”, as it’s being called, has now proposed the need for $700 billion of taxpayer dollars, raising the US debt limit to $11 trillion, to spin off the bad sectors of the financials into its own entity.  Paulson claims his plan will “minimize” the cost to the taxpayer in the long run, but who can really be sure?  As part of the plan, Paulson said that he was currently in talks with other countries for help.  He wouldn’t disclose which countries.       

 

Back in Ratings land, one ABK message boarder claimed that the Feds raided Moody’s on Friday looking for connections between the ratings company and hedge funds.  No link was provided, and given that any Joe Schmo can go on a Google Finance board and post whatever he or she pleases, it could very well be completely fabricated.  However, a Bloomberg article titled “Berkshire’s Bond Insurer, Moody’s Stake Face Probe”, reports that one such link may in fact come to light:

 

“Billionaire Warren Buffett’s Berkshire Hathaway Inc. faces a probe by Connecticut’s attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody’s Corp. while also running a new municipal bond insurer. 

 

Moody’s gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody’s, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett’s company an advantage.”

 

So maybe there is truth in rumor. 

 

In other news, Barclays is the proud new owner of Lehman Brothers’s investment banking and trading businesses.  The $1.75 billion deal approved yesterday is a definite bargain as compared to the one Barclays would have had to strike last week for Lehman’s entire assets before bankruptcy.      

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Friday September 19, 2008: Biggest 2-day rally in 38 years. ALL short selling banned.

September 21, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , ,

Whoa mama.  I was definitely wrong about the profit-taking.  The US market rallied harder in the last two days than it has in 38 years- longer than I’ve been alive!  Lehman Brothers, now on the OTC board as LEHMQ, gained 313% on rumors that it would sell parts of itself to foreign banks.  Barclays is back in the running.  In just the last two days of trading, I made up almost all of what I had lost in the last week and a half. 

 

The SEC banned ALL short selling- regular and naked alike- of 799 financials for the next 10 days.  The United Kingdom temporarily halted short selling yesterday, and the US did the same.  This is a huge step from just banning naked shorting; this is a total ban on betting that stocks will lose value, essentially disqualifying half of the game.  Hillary Clinton and Charles Schumer, both New York Senators, proposed the ban.  Critics say this ban will warp the market, making it seem as if the financial stocks are worth more than they are.  But when naked shorting was banned in July, the effect lasted long after the ban was lifted.  In fact, it lasted right up until last week when AIG teetered and fell and dragged the entire sector along with it.  So in a market that is so emotionally driven, a little banning may do the trick to snap the depression (no pun intended).

 

Henry Paulson, our Treasury Secretary, and Federal Reserve Chairman Ben Bernanke proposed the idea to spin all bad parts of financial institutions into its own entity- a black hole of badness.  This idea reminds me of that story I had to read in high school about the utopian society that was only a utopia because of the little girl who lived in a cage in the basement of someone’s house.  Remember that one?  I was never big on reading, so titles slip my mind.  I just remember the girl in the cage and the annual field trip every schoolkid would take to see the girl in the dirty dark cage dungeon as a reminder of why they lived as perfectly as they did.  I wonder if part of the Paulson and Bernanke plan will have the American people visiting the dark entity once a year.  Oh wait, now I get it.  We will be visiting once a year- at tax time.  Seems these two guys kept up on their high school reading. 

 

Meanwhile in Ratings Land, Moody’s threatened to downgrade Ambac (ABK) and MBIA (MBI), which dropped ABK 42% and another 27% in afterhours, and MBI 8% and another 8% in afterhours.  The ABK message boards caught fire, and it seems Moody’s may catch some of it by Monday, if not sooner. 

 

Do you know the name of that book yet?  Maybe it was a short story. 

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Tuesday September 16, 2008: The government loans $85 billion to AIG. Will Lehman accept Barclays’s bid? Naked short selling to be banned within 24 hours.

September 16, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Where to start?  All these stories are unfolding all at the same time.  Most people alive have never seen such things. 

 

AIG no doubt drove the market today.  Lehman was six times as big as Enron and WorldCom, and AIG is 50% bigger than Lehman.  Yesterday when it became clear that Goldman Sachs (GS) and Morgan Stanley (MS) were last two independent investment banks left standing, the government asked the two giants to inject capital into AIG to keep it alive.  When that didn’t go over so well, the fed went back to the drawing board and came up with a new idea, which was later captured in a Bloomberg article titled “Fed Said to Reverse Stance, Consider AIG Loan Package”.  Originally the government said that it would absolutely not help AIG, but throughout the day AIG’s tentacles were measured and realized to stretch much further than previously thought.  The news stories about AIG threw the stock all over the place today.  As an example of just how turbulent the ride was, at 2:30PM the stock was trading at $2.76.  At 3PM, the stock was trading at $5.  That’s an 81% increase in 30 minutes.  AIG is the world’s largest insurer, and unless it’s shored up, many institutions (including regional banks, as exposed by CNNMoney.com) will likely get knocked out.      

 

Reuters released an odd article today about former chief executive of AIG Hank Greenberg leading a hoard of investors in a bid to take over AIG.  I think I’ll let that one rest. 

 

The Federal Reserve, against what everyone predicted, left interests rates alone today.  The rate will stay at 2%. 

 

When the market broke in 1937 signaling the Great Depression, the US Securities and Exchange Commission (SEC) created the “uptick” rule, which essentially stopped people from betting against failing stocks.  “Naked short selling” is what it’s called now, and is when a trader buys a put for an underlying amount of stock he or she would not be able to deliver.  The SEC did not eliminate the uptick rule until July 6, 2007.

 

Our government tried to being back a sort of uptick rule this past July and it did, in fact, help the financials rebound.  You can still see the ban reflected in most stock charts, not only the financials, from July 15 until the beginning weeks of August. 

 

Now that banks are acting more like houses made of cards than they are the good old impenetrable banks we all grew up with, the government and some analysts have began buzzing about a possible reinstatement of the uptick rule.  Back in August when the ban on naked short selling was lifted off the 19 financials it protected, the plan was to create “within a few months” a sweeping rule would eliminate excessive short selling.  Some, like Alan Greenspan, think this is eliminating an important side of the market, but when a bet is sure, much like oil was six months ago, people will take and take advantage of it. 

 

The head of the SEC, Christopher Cox, announced today that the “within a few months” will probably be this week (TheStreet.com) in light of what happened yesterday and the free lunch frenzy it caused among the traders who know how to sell short naked.

 

I’m not going to lie; In this economy, with oil going down yet gasoline refusing to budge, the price of food through the roof, the cost of electricity forcing me to cram foods into my toaster oven instead of firing up my electric stove, and clothing being so expensive I’m at least 3 seasons behind (if not many more), I’d naked short sell a few of the stocks I own if I knew how to.  But just a few, not all day and not to the point I felt sick with guilt.  I wonder if anyone feels guilty.  Doubt it. 

 

I bought long into Merrill Lynch (MER) today, and added to my positions of Citigroup (C) and Washington Mutual (WM).  Washington Mutual is a real gamble, but MER should be one stock I won’t have to worry about. 

 

The Dow crossed from red to green and back again 15 times today and really rallied in the last two hours of trading to close up 141 points to $11,059.  My stocks that gained today included C, MBI, MER, MTG, RDN, RF, and WM, but it wasn’t enough to have me end the day in the green, and in fact, I’m now overall up just $2.08.  But I’m keeping the faith that regulations will come this week and we’ll look back on this time as another bottom. 

 

When the top stories are no longer about the banks, people are going to start asking questions about the price of gasoline.  Crude oil slipped another $4.56 today to close at $91.15, so why is gas still over $3.50 a gallon?  I smell “pissed off” coming. 

 

In late-breaking news tonight, Barclays announced it put a bid in to buy Lehman Brothers for $2 billion, and the government decided to loan AIG $85 billion. 

 

Also in tonight’s late-breaking news, an SEC spokesman told Reuters that “The American Bankers Association said many of its members have seen precipitous declines in their stock, high trading volumes and huge spikes in so-called failures to deliver [due to naked short sellers], leading them to conclude that their stock is being manipulated.  The U.S. Securities and Exchange Commission expects to issue new rules against abusive short selling within 24 hours.” 

 

Within 24 hours.  This is great news. 

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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.  

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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.  

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