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Panic On Wall Street.
| Good [+1]Toggle ReplyLink» basdini replied on Tue Sep 16, 2008 @ 2:07am |
 Coolness: 146125 | Stocks get pummeled
Wall Street sees worst day in 7 years, with Dow down 504 points, as financials implode. NEW [ .com ] -- Stocks tanked Monday, amid the largest financial crisis in years after Lehman Brothers filed for the biggest bankruptcy in history, Bank of America said it would buy Merrill Lynch and AIG slumped on fears that it can't raise cash. Treasury prices rallied as investors sought the comparative safety of government debt, sending the corresponding yields lower. Oil prices tumbled, falling well below $100 a barrel on slowing global economic growth. The dollar rallied versus the euro and gold prices spiked. The Dow Jones industrial average (INDU) lost 504 points, or 4.4%. It was the biggest one-day decline for the Dow on a point basis since Sept. 17, 2001, when the market reopened for trading after having been closed in the aftermath of 9/11 terrorist attacks. On a percentage basis, it was the biggest decline since July 19, 2002. The Standard & Poor's 500 (SPX) index lost 4.7%, its worst day since Sept. 17, 2001, when it plunged 4.9%. The S&P 500 also closed at its lowest point since Oct. 27, 2005. The Nasdaq composite (COMP) lost 3.6%, its worst single-session percentage decline since March 24, 2003. It left the tech-fueled average at its lowest point since March 17 of this year. "It was an ugly day," said James King, president and chief investment officer at National Penn Investors Trust Company. "Lehman's failure to find a suitor and Merrill deciding to cash in their chips before a similar fate could befall them really stoked the fears of the public." AIG exacerbated those fears in the afternoon. And all the bad news isn't out there yet, King said. "Investor confidence is at the lowest point we've seen in a while." He said that after the government bailout of Fannie Mae and Freddie Mac last week and all the other financial market bad news, this was just too much for investors. But it doesn't mean that the stock market is likely to see these kind of massive selloffs on a regular basis, King said. Nasdaq and S&P futures pointed to a higher open Tuesday, when fair value is taken into account. After the close of trade, S&P said it is cutting its debt rating on mortgage lender Washington Mutual (WM, Fortune 500) to junk status, reflecting the ongoing credit market meltdown and WaMu's exposure to the housing market. WaMu shares fell almost 27% during the session and lost another 11% in extended-hours trading. Also after the close, Hewlett-Packard (HPQ, Fortune 500) said it will cut 24,600 jobs, or 7.5% of the combined workforce of HP and the recently-purchased EDS. Shares were barely changed in extended-hours trading. Stock market meltdown: Global markets tumbled as investors reeled after Lehman Brothers filed for bankruptcy, Merrill Lynch was forced to sell itself to Bank of America and investors awaited AIG's restructuring announcement. "You have to throw out the history books because there's really nothing to compare this to," said Jim Dunigan, chief investment officer at PNC Advisors. "Any speculation as to what inning we're in becomes difficult because each step of the way seems to bring another drop," Dunigan said. Art Hogan, chief market strategist for Jefferies & Co., said the magnitude of the financial industry fallout is unprecedented, and could only be compared to the Great Depression of the 1930s or the railroad bankruptcies of the 1800s. "We've never witnessed this before," said Hogan. "There's no road map for this." Dow-component insurer AIG and mortgage lender Washington Mutual are the latest companies to spark investor fear. AIG has been scrambling to raise enough cash to fend off ratings agency downgrades and stay afloat. N.Y. Gov. David Paterson said in the afternoon that AIG will be allowed to use $20 billion in assets through its subsidiaries to stay afloat, basically providing itself with a bridge loan. AIG has also reportedly asked the Federal Reserve for a roughly $40 billion bridge loan over the weekend. In addition, the federal government has asked Goldman Sachs and JP Morgan to lead a $70 billion to $75 billion lending pool for the company, the Wall Street Journal reported. (Full story) Shares of AIG (AIG, Fortune 500) slumped 60.8%. The developments of the day cemented for investors that the credit crisis is far from over, six months after the near-collapse and government rescue of Bear Stearns. "The landscape has changed and a lot of the major players who were are no more, so of course people are panicked," said Stephen Leeb, president at Leeb Capital Management. "But it's not the end of capitalism," he said. "This may usher in something worse than what we've seen in terms of the economy, but the companies left standing at the end of this will be OK." Merrill Lynch's buyout was perhaps providing some reassurance to investors, said Dunigan, in that it shows there is still value in the market. Losses were also tempered by the Federal Reserve's decisions to loosen up its lending restrictions. The central bank could end up cutting the fed funds rate, its key overnight bank lending rate, when it meets Tuesday, analysts said. The fed funds rate currently stands at 2.0%. Also helping Tuesday: news that a group of 10 banks including Morgan Stanley, Goldman Sachs and Barclays had given up to $7 billion each to create a $70 billion lending pool to help smaller institutions. Lehman bankruptcy: Lehman Brothers (LEH, Fortune 500) announced it was filing for bankruptcy, after weekend talks aimed at saving the 158-year old firm failed. The filing came shortly after midnight Monday, after Bank of America and Barclays pulled out of negotiations to acquire Lehman, which has lost $60 billion in bad real estate bets and the credit market's collapse. Unlike with Bear Stearns back in March, the government was reportedly not willing to help finance a takeover, bailout or restructuring of Lehman Brothers. This reportedly contributed to the reluctance of other firms to strike a deal with the troubled company. (Full story) Speaking in the afternoon, Treasury Secretary Henry Paulson said that he hasn't ruled out additional government bailouts for the future. He also said that the banking system is sound. (Full story). Lehman shares plunged 94%. (Full story) Merrill Lynch buyout: After pulling out of the Lehman negotiations, Bank of America (BAC, Fortune 500) announced that it will buy Merrill Lynch (MER, Fortune 500) for $50 billion in stock. The price values the company at more than $29 a share, a more than 70% premium from Merrill's closing price on Friday of $17.05. The company has posted losses of more than $17 billion over the last four quarters and saw its stock plunge 27% last week. Shares had rallied more than 15% during the session Monday before ending little changed. Bank of America tumbled 21%. A variety of other financial shares plunged, including Citigroup (C, Fortune 500), Morgan Stanley (MS, Fortune 500), Goldman Sachs (GS, Fortune 500) and JP Morgan Chase (JPM, Fortune 500). Market breadth was negative, with losers beating winners by over 18 to 1 on volume of 1.8 billion shares. On the Nasdaq, decliners topped advancers by over six to one on volume of 2.75 billion shares. 10-bank emergency fund: In a bid to calm the markets, the Federal Reserve announced plans Sunday to loosen its lending restrictions to the banking industry. A consortium of 10 leading domestic and foreign banks, including Goldman Sachs (GS, Fortune 500), Citigroup (C, Fortune 500), Barclays (BCS) and Morgan Stanley (MS, Fortune 500), agreed to create a $70 billion fund to lend to troubled financial firms. The Federal Reserve, meeting Tuesday, could cut the fed funds rate, a key short-term interest rate, from the current level of 2%, analysts said. Oil: Oil prices plunged as investors continued to bet on a global economic slowdown. Additionally, early reports showed Hurricane Ike didn't do as much damage to oil rigs and refineries in the Texas Gulf region as expected. Oil prices were down $5.47 a barrel to settle at $95.71, the lowest point since Feb. 15. Oil dipped below $100 a barrel on Friday for the first time in five months. Other markets: In global trade, European and Asian stocks ended lower. Many major Asian markets, including Tokyo and Hong Kong, were closed for holidays. Treasury prices soared as investors poured money into the relatively safe-haven. The rally sent the benchmark 10-year note tumbling to 3.39% from 3.72% late Friday. In currency trading, the dollar slipped versus the euro and gained against the yen. COMEX gold for December delivery gained $22.50 to $787 an ounce. from: [ money.cnn.com ] it's pretty bad... more about the credit crunch in general with a timeline, from the BBC. [ news.bbc.co.uk ] |
| I'm feeling surly right now.. | |
| Good [+1]Toggle ReplyLink» Gamos replied on Tue Sep 16, 2008 @ 5:24pm |
 Coolness: 94420 | yeah..its a fucking mess. And the lehman bankraupcy will open up a whole new set of worm in fucking up the CDS market. So not its not just the mortgage market and the abcp market thats toxic.
Just as an FYI...this is how the great depression was triggered; by a credit crunch |
| I'm feeling at home ^__^ right now.. | |
| Good [+1]Toggle ReplyLink» basdini replied on Tue Sep 16, 2008 @ 9:10pm |
| Coolness: 146125 | "Just as an FYI...this is how the great depression was triggered; by a credit crunch"
it's simillar, it's not the exact same thing. it is simillar in the sense that what's going on now and what happened in the 30s was due to serious structural problems in the finnacial sector of the economy...it is different in some ways...i would be really surprised to see bank closures that result in people who lose their deposited savings...Like if Bank of America goes under (it still might, it's probobly posting at least 17 billion dollars of loses for 2008) i don't think individual private depositers will lose their money (you never know though)... all this non sense started in feb/march of 07...everybody forgets this when looking at the credit crunch their was a serious market meltdown which began in asia (china particularly) and spread around the globe, the asians markets lost about 6-8% of their value in a few days i think...with knock on effects on the Dow and the Ftse...the markets did eventually recover and rebound but i think it showed how weak the global economy was on fundementals... there is an article in the economist about that particular episode... [ www.economist.com ] |
| I'm feeling surly right now.. | |
| Good [+1]Toggle ReplyLink» Gamos replied on Fri Sep 19, 2008 @ 1:09am |
| Coolness: 94420 | The credit crunch is tied to the mortgage market. THe stock market in china is minuscule, and its ridiculously flawed, but that didnt cause what we're seeing now.
The seeds were sown with greenspan's low interest rate policy and the sub-prime mortgage instruments that major financial institutions bet on...and the mortgage market cracks started appearing near the end of 2006; no one thought it was going to be this bad though. The process is like so: The banks are highly leveraged based on assets, and when those assets start to lose money, they have to decrease their holdings because their net asset base has shrunk. And this causes a decrease in asset values because the supply of assets has increased. And this decrease in asset value means financial institutions must decrease their leverage further because their asset base has shrunk even further. At the same time, the bad assets are losing even more value due to drops in home prices... as such, they don't have money or sufficent assets on which to lend more money...and you get a credit crunch; a lack of available credit. If companies can't get money to build homes, research, build factories, invest in capital, etc theres a major problem. Ditto with people not able to borrow money for homes. The problem is that theres not enough liquid money around and not enough safe assets to use as collateral for credit... No one understands just how important credit is to the economy until theres a lack of it...the fed didn't bail out anyone the last time there was a major credit crunch (1929), and look at the result. Hence the reason the gov't is willing to print money and spur on inflation to avoid a repeat of such an episode |
| I'm feeling at home ^__^ right now.. | |
| Good [+1]Toggle ReplyLink» basdini replied on Fri Sep 19, 2008 @ 2:13am |
| Coolness: 146125 | i just don't even understand how the US government can underwrite fannie mae and freddy mac, doesn't that effectively make them responsible for annother 1.5 trillion of debt???
i think the world economy is in a tight corner right now, you have slowing growth in both the USA and Europe (the major consumer markets) and a really virulent and nasty form of inflation going around particularly in the commodity markets, it would be really bad right now if for whatever reason (a coup, or a revolution or a war) the price of oil shot up past $160 that would really destablize things. along with all of this as you pointed out there is a decidedly enemic credit market, no one is lending money, not banks to each other, (bear sterns ran into trouble because no one in the private sector could bail them out), venture capital firms aren't lending to entrpreneurs, and investors aren't putting there money into the markets...for the most part people are running towards the hard assets, property where it's still safe and gold... the Dow surged today almost 4% up 410 points. anybody's guess is as good as mine about where we go from here... one interesting thing (though probobly depressing for the people in the USA) is that the rental markets in the states are going to most likely see higher prices for rented living spaces, As people continue to default on bank loans for homes and the forclosures continue, the people who leave these homes are mostly going to rent, as they are unlikely to ever be allowed to have a bank loan again... |
| I'm feeling surly right now.. | |
| Good [+1]Toggle ReplyLink» Gamos replied on Fri Sep 19, 2008 @ 8:20am |
| Coolness: 94420 | whatever...the good news it thats its over, thanks to Sue and Joe, you friendly american taxpayers
Thats what I call a bailout...hahaha |
| I'm feeling at home ^__^ right now.. | |
| Good [+1]Toggle ReplyLink» basdini replied on Mon Sep 22, 2008 @ 1:16am |
| Coolness: 146125 | so there you go...
700 billion for wall street, thats on top of the 200 billion they already gave them over the last few months... here is an excerp from an article on cnn.... look at this the US debt is set to be 11+ trillion dollars for fiscal year 2009, this is madness. [ money.cnn.com ] Protecting the taxpayers The administration's proposal also requests that Congress authorize an increase to the nation's debt ceiling. Currently, it's set to rise to $10.6 trillion for fiscal year 2009 - which runs from October 2008 through September 2009. But the proposal requests that limit be increased to $11.315 trillion to allow for the purchases of mortgage-backed assets. The debt limit is a ceiling on how much debt the federal government is allowed to take on. Budget experts say it acts as a break on spending mostly because of political pressure, because lawmakers don't like to vote to raise it. Lawmakers are free to change it if they have reason, however. Paulson on Sunday acknowledged that the plan involves considerable risk for taxpayers, but said that the Treasury should recoup at least some of what it will spend on this bailout. "We're talking about hundreds of billions of dollars, but remember this is not an expenditure, this is money that is being used to purchase illiquid mortgage assets that are very difficult to value," Paulson said on NBC's "Meet the Press." "They will be held [by the Treasury] and they will be resold at some time. And so we can't determine what the cost is today," Paulson said. "That's going to be based on how quickly the economy recovers, what happens in the mortgage market." |
| I'm feeling surly right now.. | |
| Good [+1]Toggle ReplyLink» Gamos replied on Tue Sep 23, 2008 @ 12:49am |
| Coolness: 94420 | Its likely that the US govt will actually make money off these. They'll likely also make money off Fredie and Fannie and AIG...just not for a while...
If you ride out the business cycle, eventually all these assets will be marked up, and then the gov't might actually make a profit. |
| I'm feeling at home ^__^ right now.. | |
| Good [+1]Toggle ReplyLink» Screwhead replied on Wed Sep 24, 2008 @ 6:51am |
 Coolness: 686515 | Well, at least now it's been established: Minorities are to blame!
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| I'm feeling over 9000 right now.. | |
| Good [+1]Toggle ReplyLink» basdini replied on Mon Sep 29, 2008 @ 11:22pm |
| Coolness: 146125 | the dow fell over 700pts today on news that the bailout is still not finished being debated in the house,
the biggest fall in the history of the exchange it shed over 7% (over 1.2 trillion dollars) of vallue see more here: [ money.cnn.com ] |
| I'm feeling surly right now.. | |
Panic On Wall Street.
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