Author Topic: Hang on guys...tomorrows ride might be staggering  (Read 10557 times)

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Offline peternap

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Hang on guys...tomorrows ride might be staggering
« on: September 14, 2008, 02:35:29 PM »
In Frantic Day, Wall Street Banks Teeter
By ANDREW ROSS SORKIN

In one the most extraordinary days in Wall Street’s in history, Merrill Lynch is near an 11th-hour deal to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.

The dramatic turn of events was prompted by the cataclysm of losses that has shaken the American financial industry over the last 14 months.

The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week.

Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.

The weekend’s once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.

But as the weekend unfolded, Barclays and Bank of America, which had both considered buying all or part of Lehman, decided that they could not reach a deal without financial support from the federal government or other banks.

As a result, people briefed on the matter said late Sunday that Lehman Brothers would file for bankruptcy protection, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.

Lehman will seek to place its parent company, Lehman Brothers Holdings, into bankruptcy protection, as its subsidiaries remain solvent while the parent firm liquidates, these people said. A consortium of banks will provide a financial backstop to help provide an orderly winding down of the 158-year-old investment bank. And the Federal Reserve has agreed to accept lower-quality assets in return for loans from the government.

Lehman has retained the law firm Weil, Gotshal & Manges. The firm’s restructuring head, Harvey Miller, also spearheaded Drexel’s bankruptcy filing in February 1990.

As efforts to acquire Lehman faltered, Bank of America turned to Merrill Lynch and offered at least $38.25 billion in stock for that investment bank, people briefed on the negotiations said. The deal, valued at $25 to $30 a share, could be announced as soon as Sunday night, these people said. Merrill shares closed at $17.05 on Friday.

Merrill’s chief executive, John A. Thain, and Kenneth D. Lewis, Bank of America’s chief executive, initiated talks on Saturday, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, people briefed on the negotiations said.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #1 on: September 14, 2008, 02:35:56 PM »

Merrill’s 15,000 brokers will be combined with Bank of America’s smaller group of wealth advisers. The entity will be run by Robert McCann, the head of Merrill’s global wealth management business.

Mr. Fleming, Merrill’s president, will be president of the combined bank’s corporate and investment bank while Thomas Montag, a former Goldman executive who started at Merrill in August, will head all the merged company’s all risk, trading and institutional sales.

The leading proposal to rescue Lehman had been to divide the bank into two entities, a “good bank” and a “bad bank.” Under that last scenario, Barclays would have bought the parts of Lehman that have been performing well, while a group of 10 to 15 Wall Street companies would agree to absorb losses from the bank’s troubled assets, according to two people briefed on the proposal. Taxpayer money would not be included in such a deal, they said.

But that plan fell apart on Sunday, all but assuring that Lehman would be forced to liquidate.

The overarching goal of the weekend talks had been prevent a quick liquidation of Lehman, a bank that is so big and so interconnected with others that its abrupt failure would send shock waves through the financial world. Of deep concern is what impact a Lehman failure would have on other securities firms, insurance companies and banks, which have come under mounting pressure in the markets.

Even as Lehman and Merrill played out, the insurance company, the American International Group, was planning a major reorganization and a sale of its aircraft leasing business and other units to stabilize its finances, a person briefed on the company’s strategy said on Sunday.

A.I.G. became one of the focuses at an emergency gathering of Wall Street executives over the weekend, and was trying to arrange a capital infusion in the face of possible credit downgrades.

It was unclear whether A.I.G. would succeed in its capital search, but a person briefed on the discussions said it was seeking more than $40 billion even as it tried to sell assets to shore up its financial footing.

Among the businesses likely to be sold is A.I.G.’s aircraft leasing business, the International Lease Finance Corporation. Founded in 1973, the business has nearly 1,000 planes in its fleet.

Investors, afraid that A.I.G. would have to absorb further write-downs in its already damaged mortgage securities and collateralized debt obligations, have driven down the company’s shares in recent days. The stock closed Friday at $12.14 a share, a decline of 46 percent for the week.

Ben White, Jenny Anderson, Eric Dash, Louise Story and Michael de la Merced contributed reporting.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline desdawg

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #2 on: September 14, 2008, 06:03:09 PM »
That is interesting Peter. B of A was navigating on Lehman and wound up with Merril. And reportedly they didn't want to be in the investment banking business at all. I stuck with B of A for my business and personal accounts when things were shaky a while back after Indymac bit the dust thinking a larger bank might have more staying power. What do you suppose is going to happen next?
I have done so much with so little for so long that today I can do almost anything with absolutely nothing.

Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #3 on: September 14, 2008, 07:39:39 PM »
I wouldn't want to guess.

This is one of those times when I'll sit down with a bag of popcorn and watch.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline benevolance

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #4 on: September 14, 2008, 11:47:12 PM »
the rest of world is thrown on it's ear because they are getting jittery due to all the trouble here... It is not a good time at all.

Offline desdawg

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #5 on: September 15, 2008, 07:44:44 AM »
Every sector of the market is down. Go figure. Maybe by the end of the week things will get back to semblance of order in the rest of the marketplace.
I have done so much with so little for so long that today I can do almost anything with absolutely nothing.

Offline John Raabe

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #6 on: September 15, 2008, 09:10:18 PM »
Well, Monday was sure fun!

What will the rest of the week bring?

Here's the Monday night BBC take on Asian markets: http://news.bbc.co.uk/2/hi/asia-pacific/7617976.stm

Article below makes the point about getting the pain and suffering out in the open and letting the chips fall where they may. Probably better than the Japanese take of the 1990's where things were carried on the books but not resolved.

http://www.nytimes.com/2008/09/16/business/16nocera.html?pagewanted=1&_r=1&hp
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Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #7 on: September 16, 2008, 02:56:23 AM »
My guess John, is that today will be a slower roll downhill. I still have popcorn for todays meals. What's going to happen to AIG? That will be an indicator for the near future. AIG is a good company that needs money in a horrible economy.

If they have to sell assets now, they're bankrupt. If they can find a bridge loan to carry them a year, they will be a superman company....

The Fed will meet today and no matter what they do, it will be wrong!

This isn't the big one but it's like blood trailing a deer with a nicked artery. He gets weaker with every step.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline glenn kangiser

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #8 on: September 16, 2008, 06:19:55 AM »
This has been coming since they pulled 9/11.  It was ripe then.  It is ready to be picked now.

Sorry, but I still see it as a pyramid scheme where the guys at the bottom cannot win because the ones at the top have already walked away with the profit. 

Just my view - I know a lot of people make money at it if they are above average like you, Peter.
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Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #9 on: September 16, 2008, 06:29:36 AM »
I know a lot of people make money at it if they are above average like you, Peter.

Above average, not hardly Glenn.....God looks after fools and children. I am both! d*
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline glenn kangiser

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #10 on: September 16, 2008, 06:36:02 AM »
Well, ...whatever...but glad you are here anyway.  You bring lots of good info to the forum.

...and speaking of these topics, I miss muldoon.  Hope they are still OK.  At least he wasn't right on the coast.
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Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #11 on: September 16, 2008, 06:59:02 AM »
Yeah, I miss muldoon too.
I know what he's going through. Living with no power is not a big thing if your set up for it....but when your whole life revolves around the power grid, it's hard to shower, cook. cool down or repair the house.

My neighbor moved in his RV. I just fired up my big  generator. Dozens of people gathered at the nearby hospital trying to get food...The hospital didn't have power either.
I had a spare Generator I loaned out. It was nearly a month before the entire area was back on grid and I got that generator back. I'd just take it from one person who had power restored, to another that was out.

A friend of mine who should know better, had a generator, but no gas. He was closer to the coast in a rural area and would be last to get back on grid. I took him a 50 gallon drum of gas.

After two days, a few of us got together and went from house to house, removing trees from houses. The tree companies were booked for months and were charging unbelievable amounts. 5000.00 to take a tree off (2 hours work). We didn't charge anything but it was a little irritating when people didn't at least say thank you.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline glenn kangiser

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #12 on: September 16, 2008, 07:02:12 AM »
It's amazing how many people have come to think it is owed to them.  Government training.
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Offline John Raabe

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #13 on: September 16, 2008, 07:23:57 AM »
We all need more people like Peter and Glenn to teach folks what it means to be a neighbor.

Most of us are out of training and suspicious of "others" after years of huddled by the light of the TV watching cop and CSI type shows.

We don't recognize an act of help and kindness when it happens to us. However, somebody probably got the credit... "Who was that nice man from the PUD?"
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Offline considerations

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #14 on: September 16, 2008, 07:29:02 AM »
This financial meltdown has me feeling pretty helpless, and very unsure of what to do about my IRA.  All that work to build it up for retirement, what will happen to it?  :(

Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #15 on: September 16, 2008, 07:39:49 AM »
I wouldn't worry about it in the long run. There is a natural order to meltdowns. The problem now, is that our economy has been doing the shuck and jive for so long, it's complicated the natural order.

The value of your IRA may well go down and stay down....but....eventually the cost of material goods and the cost of living, will come down to meet it. In other words, when everyone is poor, there are no poor people anymore. ???

If that makes any sense.
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline muldoon

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #16 on: September 16, 2008, 05:08:07 PM »
wow -- I'm out of the loop for a few days and everything just falls apart.   This past week has been exhausting, I literally feel like I have aged 10 years; physically and emotionally.  Thank you guys for the kind words and prayers, they helped immensely.   Life is settling into somewhat normal, as far as that can be right now.  Got power back today, that was huge.  Lots of work, but I have been busy. 

I saw some cnbc coverage that snapped my neck, dow -500, no more leh, aig toast, mer gone? wow.  Those guys are sure are dreadful announcers tho, they couldn't sniff out news in a paper bag. 

So, I have not read all the details of the events.  But what I have seen and background information paints a pretty grim picture. 

1) when freddy and fannie went under and were placed in receivership by the treasury, this triggered a event in the insurance coverage on those bonds.  Companies that wrote insurance against loss on those bonds had to pay up.  Enter the biggest insurance company in the US going belly up a week later.  I dont agree that AIG is a sound company that just needs funds.  They made the bed of billions in debt coverage and their simply is no escaping leverage when it works against you.  So they got their "bailout" tonight.  The bailout is no such thing, its a 85 billion line of rcedit for 24 months, at 3 month libor + 850 basis points.  roughly 12% interest, something like 9 billion a year in interest or 2.3bil a quarter.  This is guido loanrates, not bailing out.  Its to send a strong picture to others that you really dont want to turn to the "Federal reserve" for help.  Not only will the fed gut your management, take your common and opreferred stock to zero, issue warrants, but we'll give out some mafia rates too.  The credit crunch has become a full on crisis.   In all honesty, the LIBOR could shoot to high hell and AIG is still dead, bailout or no. 

2) The other piece of news that I didnt see talked about.  The TIC report comes out on the 16th, it runs two months behind and shows the amount of capital going into and out of treausuries. 
http://www.ustreas.gov/press/releases/hp1138.htm
Brutal.  And this was for July, its certainly much much worse now that I'm hearing about other countries being unable to continue bailing the us show.  From the report:

Monthly net TIC flows were negative $74.8 billion. Of this, net foreign private flows were negative $92.9 billion, and net foreign official flows were $18.2 billion.

so, foreign money is flowing out. 

3) Finally on to asset classes, and how these things relate.  As LEH and others downstream from them realized they were bankrupt they were forced to SELL everything in order to pay whatever they could.  When HUGE selling occurs prices plummet.  It occured in stocks, oil, gas, silver, gold, everywhere.  Nowhere safe to hide it seemed.  ...  except maybe treauries?  What did us bonds do?  We know from point #2 that us Ts are going into the flusher.  But the TNX is calm, IRX is behaving.  The only thing that makes sense to me is extreme flight to safety.  Money always must go somewhere. 

Thats bad.  in fact I would say its the grimmest set of conditions I have seen to date.  That money isnt being invested in Ts, its scared and hiding their and its the only thing holding them up as international support wanes.  Quite frankly, once that surge stops coming in, the price of US debt goes to moonshot.  It wont matter though. 

The fed held a FOMC meeting today, and they said some interesting things.  No rate cut because of inflation concerns.  On the face that is ridiculous, were clearly deflating.  Oil is actually 4% down for the year now, giving back some 40+ a barrel and still falling.  I'll be glad when people finally wake up to the fact that the fed is just as dead broke as Lehman or AIG.  They could not cut because their is no money to fight the trend.  If you offer funds below the rest of the world - you indeed become the only lender because everyone simply goes to you until you bleed dry.  This is why the fed doesnt set rates, they follow and have for some decades.   

-- my stock tip for this situation, and I know this sounds bad but I believe this is the point at which it becomes prudent, invest some in bullets and beans and the like.  might be a long winter. 

Offline glenn kangiser

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #17 on: September 16, 2008, 07:20:38 PM »
Great to have you back muldoon and glad things are improving for you. 

Great to have your analysis of the situation.  It always sounds so professional even though I'm not as deep into this stuff as you guys are - I still read it all and try to pick up a couple smarts..

:)
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Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #18 on: September 16, 2008, 09:30:29 PM »
Great to have you back muldoon and glad things are improving for you. 

Great to have your analysis of the situation.  It always sounds so professional even though I'm not as deep into this stuff as you guys are - I still read it all and try to pick up a couple smarts..

:)

Me too muldoon. Nice to have you back!
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline desdawg

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #19 on: September 17, 2008, 02:10:39 AM »
Muldoon
As said by the others welcome back. I have seen some pictures of the devastation. I hope your place doesn't resemble anything I saw in those flics. It is good to hear from you.
I have done so much with so little for so long that today I can do almost anything with absolutely nothing.

Offline apaknad

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #20 on: September 17, 2008, 05:06:50 AM »
hey muldoon,

 glad to see you poke your head out of the gopher hole and you are ok. good analysis on money situation. like has been stated before... plan like we are in the great depression again... bullets and beans and emergency mindset. firearms, water, generators, land, you all know the list. BTW, i loved what some of you had in your emergency kits and gave me more things to add to mine. the financial house of cards is finally crumbling (i still like having junk silver as a stop gap measure).
unless we recognize who's really in charge, things aren't going to get better.

Offline peternap

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #21 on: September 17, 2008, 05:15:59 AM »
The market has no direction today. Volume is low but everything on my watch list is up.....except what I own  d*

AIG is going down but the SEC is warning shorts they will start enforcing the rules again.....That's very odd. They only enforce the naked shorting rules when it suits their purpose. :-\
These here is God's finest scupturings! And there ain't no laws for the brave ones! And there ain't no asylums for the crazy ones! And there ain't no churches, except for this right here!

Offline muldoon

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #22 on: September 17, 2008, 05:30:19 AM »
ugly this morning.  to touch on what I said yesterday about fed being depleted and treasuries getting hammered.

This came out this morning, still no link, just bloomberg terminal. 

FED: Statement on Tsy program: "Today, the Treasury Department
announced the initiation of a temporary Supplementary Financing
Program.The program will consist of a series of Treasury bill au
ctions, separate from Treasury's current borrowing program, with
the proceeds from these auctions to be maintained in an account
at the Federal Reserve Bank of New York. Funds in this account
serve to drain reserves from the banking system, and will theref
ore offset the reserve impact of recent Federal Reserve lending
and liquidity initiatives"

Now were bailing out the Federal Reserve?

apaknad, I tend to agree on the junk silver.  I have a couple hundred dollars in face value of mercury dimes.  they are 90% silver, working out to 11 dimes or so is an ounce of silver.  At the time it was some insurance and something I could pass to my kids or grandkids one day.  speaking of that holy moly, look at gold and silver spike this morning.  its acting like it they are talking of printing. 




peter - I think the direction is panic looking for exits.  I would watch the treasury market moreso than the stocks today as thats where the real panic may come in.  were about to see the great bond death spiral.

This will take some time to play out, but to be honest I didnt expect to see where we are now until well after the election.  Things are picking up steam. 

Offline John Raabe

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #23 on: September 17, 2008, 05:49:47 AM »
Panic looking for exits does not sound good.

Saw this on marketwatch (Home Depot cuts prices up to 50%) http://www.marketwatch.com/news/story/story.aspx?guid={A2A6E1FA-5914-4251-83C0-1294FA0F1707}&siteid=rss

More and more looking like a deflationary spiral headed for the drain...

Doesn't it spin the other way in the southern hemisphere? ???
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Offline apaknad

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Re: Hang on guys...tomorrows ride might be staggering
« Reply #24 on: September 17, 2008, 05:59:22 AM »
i might also add to not buy gold to hold as it is not easily liquidable. you may have to have it assayed to prove to someone that it is gold of whatever purity whereas silvers value is easy to figure out as muldoon was saying. if you feel that you want gold then think mining stocks, or buying w/o planning on having it delivered or mining equipment stocks(i wouldn't buy any stock right now but maybe something to consider later after due diligence) i can't believe being a comodities broker in precious metals years ago still has its uses, go figure ???
best bet, bottom line...junk silver to hold.
unless we recognize who's really in charge, things aren't going to get better.

 

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