David Kirkpatrick

May 27, 2010

Fallout from the financial meltdown and bailout

Lehman Brothers Holdings is suing JP Morgan Chase.

From the link:

Lehman claims JP Morgan “siphoned off” billions of dollars of assets in the days leading up to its bankruptcy.

JP Morgan was Lehman’s main short-term lender before its September 2008 collapse. It is accused of contributing to the failure by demanding $8.6bn of collateral as credit markets tightened.

JP Morgan has called the lawsuit “ill-conceived”.

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April 22, 2010

The party of “no” pulls gun …

… shoots foot.

Here’s a bad procedural move by the GOP today:

Senate Republicans on Thursday blocked an effort by Democrats to start debate on legislation to tighten regulation of the nation’s financial system, and the two sides traded bitter accusations about who was standing in the way of a bipartisan agreement.

There is some political jujitsu going on right now, and the GOP stands to lose a lot more than the financial reform debate.

Also from the link:

The majority leader, Harry Reid of Nevada, asked Republicans to agree to begin debating the measure, which would impose a sweeping regulatory framework on Wall Street and big financial institutions. But the Republican leader, Senator Mitch McConnell of Kentucky, objected, saying Democrats were pre-empting negotiations to reach a deal.

McConnell has a great point about negotiations, but his policy of all-out obstruction against all things Democrat in the legislature is working against him here. The Dems are very happy to force the GOP to block this move and substantially raise the floor of compromise. The longer the GOP opposes debate on the bill, the more the party appears to be in the pocket of Wall Street.

Fast forward to November and you’ll find a lot of ads hammering this point home to an electorate very, very sick of Wall Street and all things existing in the rarefied air of high finance. The economy is likely still going to be in the tank by the time election day rolls around and the GOP stands to gain, maybe gain a lot. The one thing it does not need is to be saddled with a tangible partnership with those evil-doers on Wall Street. And that is what has already started with today’s move.

Here’s the New Republic’s Jon Chait three days ago on why the Dems eagerly anticipated this move:

Chris Dodd says the Senate is going to hold a vote on his bill Wednesday or Thursday. Republicans still say they can muster 41 votes in opposition. The ideal for Democrats would be to have the whole GOP vote to filibuster the bill, then have a huge debate, and then have one or more Republicans defect and pass the bill anyway. Then you get an accomplishment and a chance to expose the GOP as carrying water for Wall Street.

December 23, 2009

Wall Street rigged the CDO market

Man, it’s easy to make money when you can create a bad investment out of whole cloth then bet against its success while selling it hand-over-fist to your unsuspecting clients. There ought to be some legal action in the form of civil suits from defrauded investors if nothing else.

Wall Street wonders why Main Street holds it in such contempt. Stories like this should make that dynamic easy to see.

From the link (bolded text my emphasis):

Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.

Goldman’s own clients who bought them, however, were less fortunate.

Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.

Also from the link:

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

November 21, 2009

About those Goldman Sachs bonuses

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 12:20 am

Here’s an interesting bit of number crunching:

Strangely we haven’t heard much recently about impending gigantic Goldman bonuses. Once the issue hits the news radar again, I hope to see some detailed analyses of how, exactly, Goldman made its recent record profits.

At the link below you will find an analysis of Goldman’s prop trading numbers for 2008 (not a good year), using the public records of its charitable Goldman Sachs Foundation. Thanks to a reader for sending this. I don’t know how reliable this method is — it all depends on whether GSF’s records reflect the firm’s overall trading pattern.

And now the nut from the above-mentioned analysis:

… Yet what is obvious no matter how the data set is sliced and diced, is that the firm was bleeding money across virtually all prop-traded groups in 2008. Is it any wonder that the firm’s only source of revenue is courtesy of i) the near-vertical treasury curve (thank you taxpayers) and ii) the ability to demand usurious margins on Fixed Income and other products from clients trading in bulk who have no other middleman choices.

November 19, 2009

More news from the “no duh” department

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 3:19 pm

Today it’s from Treasury Secretary Tim Geithner:

“This credit crunch is not over,” Geithner at a small business financing forum in Washington hosted by the Treasury. “It may feel dramatically better for large companies, but it is not over for small businesses across the country.”

November 17, 2009

Small business loans down over $10B

Yep, you read that header correctly — more than ten billion dollars of available credit has disappeared for small business while Wall Street and big banking rolls in federal funds.

Disappointing.

From the link:

The 22 banks that got the most help from the Treasury’s bailout programs cut their small business loan balances by a collective $10.5 billion over the past six months, according to a government report released Monday.

Three of the 22 banks make no small business loans at all. Of the remaining 19 banks, 15 have reduced their small business loan balance since April, when the Treasury department began requiring the biggest banks receiving Troubled Asset Relief Program (TARP) funding to report monthly on their small business lending.

November 10, 2009

2009 Wall Street bonuses …

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 2:38 pm

… are not going to go over all that great. I understand the nature of compensation in the financial industry, but sometimes image is everything, and the industry has a pretty shabby image on Main Street.

From the link:

Ask yourself, in this day and age, with officially reported unemployment at 10.2%, the highest since 1983, should a 36-year-old derivatives trader get $10 million or $15 million in bonus money on top of a $400,000 to $1 million direct salary. It’s the hot-button money issue of our time, the only visible totem of Wall Street that the public can easily understand. The public sees headlines about stocks being up 62%, the Dow over 10,000, gold at $1,100 an ounce, interest rates at zero and a handful of financiers able to buy $40 million apartments.

It’s a great time to play the market, sure, but the overall effect on the economy is pretty hollow when small and medium businesses cannot borrow money. Treasury Secretary Geithner admits to this huge vacuum, but he has no concrete or meaningful solution.

October 19, 2009

Risk-taking and Wall Street

This BusinessWeek article is actually about the demise of risk-taking in Silicon Valley, and it does a great job of identifying some of the players who’ve collectively killed risk in the one-time land of starry-eyed entrepreneurs.

The final culprit — Wall Street — and the indictment against it is interesting, true and really applies across the spectrum of business sectors as a succinct reminder of the myriad problems facing the Street and what has become business as usual. Particularly the point about Sarbox and why entrepreneurs might shy away from IPOs.

From the first link:

WALL STREET

Wall Street hasn’t played as direct a role in Silicon Valley since the late 1990s, when analysts like Mary Meeker and bankers like Frank Quattrone knew as much about new startups in the Valley as the VCs did. That’s part of the problem.

Startups have to want to go public in order to go for the home run. And most entrepreneurs today just don’t. Blame it on bankers and analysts who no longer care about a company with a sub-$500 million capitalization; blame it on Sarbanes-Oxley; blame it on activist hedge funds who don’t give CEOs the leash to innovate; blame it on scars from companies going public in the 1990s that had no business going public and paid the price.

But too many great entrepreneurs sell early not because they’re lazy, not because they want a quick buck, but because the idea of running a company all the while trying to meet quarter-by-quarter Wall Street estimates is antithetical to risk-taking.

Verdict: There’s got to be a reward for all that risk, and until the public markets become a place great entrepreneurs aspire to get to, that risk-reward equation is hopelessly lopsided.

October 16, 2009

Too big to fail …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:11 pm

… and too much arrogance not to use our tax dollars to run up huge year-end bonuses. I know that’s an overstatement and Wall Street compensation is pretty arcane, but the message Main Street is going to get when the final numbers come out is one big middle finger from Wall Street.

If I were Goldman Sachs I’d ramp down a whole lot lest the heavy hand of a Democratic Congress and White House take unwanted action interfering with business as usual on the Street.

Call it what you want — balls, chutzpah, hubris, whatever — it’s very, very bad pubic relations, very questionable internal policy to continue the old ways when the entire game was changed by last year’s bailout, and frankly I think the best description for Goldman’s feeble justification is blind stupidity.

From the link:

As Wall Street firms typically do, Goldman set almost half that sum aside to compensate its workers. Through the first nine months of 2009, the firm socked away $16.7 billion, enough to pay the average Goldmanite $526,814.

The bonus pool is on pace to hit $21 billion for 2009, which would match the record bonus payout of 2007.

Goldman said it won’t decide the size of the bonus pool till year-end. In any case, the payments will be substantial — and will come just one year after huge sums of taxpayer dollars were funneled to financial institutions.

Critics charge that the lion’s share of Goldman’s profits comes from making big bets using cheap dollars printed by the Federal Reserve. Plus, given the crisis that followed the failure of Lehman Brothers, there’s a sense that government officials won’t let big firms go bust. That in effect gives too-big-to-fail firms a license to bet the house.

“This is almost an ‘in your face’ kind of setup here,” said Michael Panzner, a Wall Street veteran who blogs at financialarmageddon.com and who wrote a 2007 book predicting economic disaster. “They’re rolling the dice, and so far they’re winning,” said Panzner.

September 25, 2009

Shortsighted CEOs

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 4:30 pm

Or was it nearsighted? Or maybe just plain blind as bats. At any rate this is a humorous, and sad, collection of quotes from erstwhile kings of Wall Street.

From the link:

Richard Fuld, Lehman Brothers: “Our core franchise and our culture are strong. Our capital and liquidity positions have never been stronger.”—June 16, 2008, on a conference call with analysts

What happened next: With clients pulling their money from Lehman accounts, the firm ran short of cash. Fuld reportedly turned down a financing offer from Warren Buffett, perhaps because he thought a government bailout—like that of Bear Stearns—would come with better terms. But no bailout materialized, and Lehman filed for bankruptcy on Sept. 15, 2008.

September 18, 2009

SEC to ban flash orders

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 5:06 pm

Want a peek into the dirty world of high finance and get a more detailed picture of the total fail of the Securities and Exchange Commission? Check out this NYT article.

From the link on how flash orders were abused:

Critics say flash orders favor sophisticated, fast-moving traders at the expense of slower market participants. Using lightning-quick computers, high-frequency traders often issue and then cancel orders almost simultaneously and get an early peek at how others are trading.

And getting a bit more granular on the abuse:

Getting flashed an order offers traders a distinctive edge. When buy and sell orders come into an exchange, they are first flashed to those paying to see them for 30 milliseconds — 0.03 seconds — before they are available to everyone else. In the blink of an eye, the systems can detect patterns and get a jump on other investors. Before others even sees the order, high-frequency traders swoop in and then out.

July 2, 2009

Cloud computing and Wall Street

Looks like IT tight budgets at financial firms are the rubber and cloud computing is the new road.

From the link:

Can new technology initiatives help pull Wall Street out of the danger zone? A new survey released by IBM and Securities Industry and Financial Markets Association (SIFMA) finds that IT budgets are tight on Wall Street, but things are loosening up, and there’s going to be plenty of demand for new technology initiatives in the near future as firms on the Street look to “transformational” solutions to help better manage risk.

The survey of more than 350 Wall Street IT professionals found a “significant” increase in interest in new technologies and computing models, in particular cloud computing, as firms seek to overcome budgetary restrictions and skills shortages. Almost half of the respondents now see cloud computing as a disruptive force.

The past year has seen marked growth interest in cloud computing. The number of respondents predicting that cloud computing would force significant business change more than doubled (from 21% in 2008 to 46% in 2009), making it the top disruptive technology, ahead of operational risk modeling and mobile technologies.

Major initiatives underway at most Wall Street firms include enhancing electronic trading tools (69%), improving data capacity and bandwidth (58%), and improving technology framework and infrastructure
(58%). It can be assumed that the last item includes SOA efforts.

February 17, 2009

Five-act play on Wall Street stupidity

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:35 pm

Pretty funny stuff from MainStreet.com. Here’s five bits of prima-facie evidence of Wall Street stupidity.

From the link, number one with a Dumb-o-meter score of 95:

If Tim Geithner actually believed his “Financial Stability Plan” was going to calm anybody, we’d hate to hear his ideas on how he would wreak true terror.

Stocks in New York sold off sharply Tuesday after the Treasury secretary unveiled his much-hyped plan. (The fact that he called it a financial stability plan is an oxymoron, italics intended.) In short, Geithner’s $1.5 trillion program aims to combat the financial crisis through a collaboration of public and private investments and a consumer and business lending initiative.

February 4, 2009

Those Wall Street bonuses

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 12:01 pm

There’s been a lot of ink — actual and virtual — spilled over the bonuses paid out on Wall Street, particularly after the bailout. I’ve been guilty of the very thing even though I knew the reality wasn’t nearly as bad as it was easy to make it seem.

To my defense I only complained about post-bailout bonusing that either just looked very bad PR-wise, or came from companies that wouldn’t have any money to bonus with at all if that cash hadn’t come from the taxpayers pocket.

At the same time I never spent much time on the other side of the coin. A good example is a holiday party mid-December where I spent a good while talking to a trader at a major, and solvent, investment banker who is getting stiffed for six figures of earned bonuses over all of last year because of the bailout and various terms and conditions placed on his firm. He earned the money long before the crisis or bailout, but won’t see a penny of it.

Here’s a CIO.com article with some facts and figures on Wall Street and bonuses. It might open a few eyes.

From the link:

By now I’m sure you’ve all heard about the $18.4 billion worth of bonuses that Wall Street firms paid out to employees in 2008. Here are a few facts about that $18.4 billion—and Wall Street bonuses in general—that you may not know:

  • The $18.4 billion bonus pool was spread out across all Wall Street employees; it didn’t just go to top executives (if that’s any consolation), some of whom wisely forfeited their bonuses for the year, according to the New York State Comptroller’s Office, which broke the news about Wall Street bonuses on January 28.
  • A total of 165,000 employees benefitted from the bonus money, according to the Comptroller’s Office.

January 30, 2009

Wall Street ought to burn …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 1:01 pm

… for this. Given the circumstances, this level of bonusing is inexcusable and if the bailout, SEC and Fed have any teeth at all, this should be punished. I’m a capitalist, and when my business is on rough waters I simply don’t make as much money. I certainly don’t get “bonuses” for failure.

The Wall Street bailout was one of the final shameless and shameful acts of the Bush 43 administration.

From the link:

By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived.

Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.

 

That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.

Some bankers took home millions last year even as their employers lost billions.

January 23, 2009

Goodbye and good riddance Cox

I’m with this story. Couldn’t happen too soon and if nothing else, the SEC will be headed up with a lot more competence. Hopefully a whole lot more.

From the link:

Christopher Cox has packed up as chair of the U.S. Securities and Exchange Commission, leaving behind a demoralized agency that failed to spot Bernard Madoff’s alleged mega-fraud or forestall the collapses of Bear Stearns and Lehman Brothers.

His resignation took effect yesterday, a spokesperson said.

During Cox’s 3 1/2 years, the SEC was criticized by lawmakers, investors and its own inspector general as lacking aggressiveness and being deferential to Wall Street banks.

U.S. President Barack Obama picked a fellow Democrat, Mary Schapiro, the head of the U.S. brokerage industry’s self-regulator, to succeed the Bush administration appointee.

“I respect Chris Cox, but there’s no question that the commission has been much too passive in area after area under his leadership,” said law professor Harvey Goldschmid, a former SEC commissioner.

“The morale problems and the lack of public regard for the agency must be immediately addressed by Mary Schapiro.”

January 15, 2009

One million foreclosures in 2008

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 4:21 pm

A ridiculous number. Especially given that Wall Street was handed money that is doing absolutely nothing. The Fed and really all of D.C. completely fell down on the job with this. I’m betting history will not be very kind looking back in a few years.

From the link:

SACRAMENTO, Calif.–(BUSINESS WIRE)–January 14, 2009–About 1 million homes were lost to foreclosure in 2008, up nearly 63.5 percent from 2007, according to the U.S. Foreclosure Index from ForeclosureS.com, a leading real estate information provider.

In this first look at complete 2008 statistics, the Index also shows nearly 2.1 million pre-foreclosure filings last year, up nearly 62 percent from 2007. Pre-foreclosure actions can include notice of default and/or foreclosure auction leading up to an actual foreclosure.

Month to month, foreclosed properties repossessed by lenders spiked in December, up 19.3 percent to 97,841 from November, when 82,033 properties were foreclosed. The December increase followed two months of steady declines, but December still was 6.1 percent below the peak foreclosure month of September. Pre-foreclosures, which had been slowing until December, also climbed to 190,467 in December, up 11.9 percent from November.

All regions of the country showed increases in lender-owned properties and pre-foreclosure filings in December, ForeclosureS.com analysis shows.

U.S. FORECLOSURE INDEX:
YEAR TO DATE PRE-FORECLOSURE FILINGS BY REGION
Pre-foreclosures   YTD 2007   YTD 2008   Change
Region   Filings   Per Household   Filings   Per Household    
Midwest   185,073   1.69%   228,849   1.98%   23.6%
Southeast   383,697   2.31%   735,417   4.29%   91.7%
Northeast   190,832   1.14%   235,745   1.34%   23.5%
Southwest   528,399   2.09%   883,006   3.60%   67.1%
Other States   3,476   0.60%   6,034   1.03%   73.6%
Nationwide   1,291,477   1.85%   2,089,051   2.95%   61.8%
*Percentage of every 1,000 households in state
U.S. FORECLOSURE INDEX:
YEAR TO DATE REO FILINGS BY REGION
REO   YTD 2007   YTD 2008   Change
Region   Filings   Per Household   Filings   Per Household    
Midwest   182,176   1.13%   195,057   1.24%   7.1%
Southeast   146,068   0.89%   253,126   1.49%   73.3%
Northeast   26,333   0.24%   41,250   0.25%   56.7%
Southwest   241,544   0.93%   501,641   1.99%   107.7%
Other States   1,056   0.21%   1,496   0.27%   41.7%
Nationwide   597,177   0.85%   992,570   1.34%   66.2%
*Percentage of every 1,000 households in state

On a quarterly basis, the Index also shows that the number of properties lost to foreclosure, 266,986, and pre-foreclosure filings, 528,241, both dropped in the fourth quarter, 9.2 and 2.4 percent respectively, compared with the third quarter.

“While the sheer number of about 1 million foreclosures is staggering, it was not unexpected,” says Alexis McGee, foreclosure expert, educator, author, and president of ForeclosureS.com. “Since July, we anticipated that we would see about 1 million foreclosures this year.”

“But there is good news – a variety of indicators show that some housing markets are bouncing back and we should see substantial improvement in 2009,” McGee says. “I think 2009 will surprise many people who have bought into the gloom-and-doom agenda.”

“In some areas like California, the housing recovery already has begun,” McGee says. “Inventories of unsold homes will drop quickly this year as people realize that today’s deals on homes are the best they’ll likely see in their lifetimes, both in terms of affordable prices and low interest rates!”

“The earlier declines in foreclosures and pre-foreclosure filings were likely the result of changes in state laws that slowed down the foreclosure process for many homeowners. But lenders played catch-up with foreclosure filings at year-end as December’s numbers indicate,” McGee adds.

“Don’t expect another tidal wave of foreclosures this year, either, just because more adjustable rate mortgages are due to reset,” she says. “Current mortgage rates are at 30 year lows and dropping. Those who qualify will be able to refinance and enjoy lower monthly payments, not higher ones. Those that can’t will end up either selling their homes pre-foreclosure or losing them to foreclosure. But I am anticipating our market can absorb this inventory.”

McGee said her optimism for 2009 is driven in part by positive housing market indicators, including:

Housing affordability. Thanks to drops in home prices and mortgage rates, housing is the most affordable it’s been since February 1994, when a mortgage on a median-price home equated to 18 percent of the median income. Credit Suisse estimates today’s mortgage payment on a median price home in October represented 16.7 percent of median household income based on a 6.23% mortgage. At current 5% interest rates and dropping houses affordability is more likely under 15% of the median income.

Growing U.S. population. The Census Bureau projects with births, deaths and immigration U.S. population will increase by one person every 14 seconds in 2009. More people mean more demand for housing.

Coming housing shortage. Housing construction has plummeted. Housing starts hit record lows in November, off 18.9 percent to a seasonally adjusted annual rate of 625,000 units. New building permits plunged 15.6 percent. That’s great news for housing markets because with fewer homes being built at the same time population — and housing demand — is exploding, the shortfall has to be made up somehow. In this case, it opens the door for the nation’s one million foreclosures to be easily absorbed in the market, and housing supply finally to catch up with demand.

Buyers for foreclosure properties.Tighter housing supplies mean buyers will look to foreclosure homes as viable purchase options.We are so under building right now that whatever new foreclosures do hit the market, I see them offsetting the losses of new housing we need but are not getting,” says McGee.

Unemployment is an issue, but not as large as some think. “The unemployment rate released by the government for December was consistent with economists’ consensus estimates and came in considerably better than a private forecast released in early January,” McGee says. At 7.2%, unemployment is just shy of the 7.8% experienced during the 1990-1991 recession but still well below our double-digit levels of the early 1980s.

The following charts provide additional information on trends from the latest U.S. Foreclosure Index from ForeclosureS.com:

U.S. FORECLOSURE INDEX:
TOP 10 STATES IN NUMBERS OF REO FILINGS
State   Filings   Per Household*
California   260,709   2.27%
Florida   107,833   1.71%
Texas   70,037   1.17%
Arizona   65,898   3.47%
Michigan   62,419   2.09%
Georgia   53,423   2.55%
Ohio   47,544   1.22%
Nevada   37,043   4.99%
Colorado   30,132   1.96%
Illinois   27,957   0.74%
*Percentage of every 1,000 households in state

For all of 2008, California still tops the list in terms of number of REO filings with nearly 1 ½ times as many filings as No. 2 and 3 on the list, Florida and Texas.

On a per household basis – often the best way to judge trends – California ranks a distant fifth with 22.7 of every 1,000 households lost to foreclosure in 2008. That’s behind Nevada (49.9 for every 1,000 households in the state); Arizona (34.7 of every 1,000 households); Mississippi (25.6 per 1,000); and Georgia (25.5 per 1,000). On a quarterly basis, however, California’s 4 th quarter REO filings (54,198) plunged 39.44 percent from third quarter (89,501).

December 31, 2008

Back to 2002

So to speak. I don’t want to be all doom and gloom here on the last day of the year, but this is some sobering news — 2008 saw the loss of six years of market gains. They’ll eventually come back, but the shocking part of this loss is the speed it happened and how it happened across the board.

Petroleum is way down despite the efforts of OPEC. Hedge funds? Investment banking?  Commodities? The only happy folks are those who shorted everything under the sun for the last half of the year.

From the link:

When the New York Stock Exchange closes later this afternoon, virtually anyone with money in stocks will have felt the punishing drop in the market.

The markets were headed for a higher close Wednesday, but overall, it was a very bad year to own stocks, any stocks — indeed, one of the worst ever. The Dow Jones industrial average will end the year down more than 34 percent, the worst year for the index since 1931, and the broader Standard & Poor’s 500-stock index more than 38 percent. Blue-chips like General Motors, Citigroup and Alcoa lost more than 70 percent of their value.

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — will be wiped out in a year marked by violent market swings.

But what is striking is not just the magnitude of the declines, staggering as they are, but also their breadth. All but 2 of the 30 Dow industrials, Wal-Martand McDonalds, fell by more than 11 percent. Almost no industry was spared as the crisis that emerged in the subprime mortgage market metastasized and the economy sank into what could be a long, gray recession.

December 29, 2008

Wall Street is in the tank

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:57 pm

Ouch.

From the link:

Investors are preparing to close out the last three trading days of 2008 with Wall Street’s worst performance since Herbert Hoover was president.

The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2 percent. That’s the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent.

The Standard & Poor’s 500 index is set to record the biggest drop since its creation in 1957. The index of America’s biggest companies is down 40.9 percent for the year.

With these statistics ready to play out this week, it is little wonder why investors are all too happy to close the books on 2008. Analysts are already looking toward January as a crucial period for the market as it tries to recover some of the $7.3 trillion wiped from the Dow Jones Wilshire 5000 index, the broadest measure of U.S. stocks.

“It is hard to gauge a recovery because there’s so many things out there that are interactive with each other,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. “Nothing is in a vacuum. Anybody who is managing money has to be on the cautious side for at least the first six months of 2009.”

November 24, 2008

Geithner tapped for Treasury

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 5:30 pm

Obama continues to build his team. Looks like this choice is amenable to Wall Street.

From the link:

President-elect Barack Obama will name Timothy F. Geithner, president of the Federal Reserve Bank of New York, to be his Treasury secretary, moving to fill a key post at a moment when the quavering financial markets are looking for reassurance about the direction of economic policy, people briefed about the decision said Friday.

In picking Mr. Geithner, who has been at the center of efforts to contain the financial crisis, Mr. Obama passed over Lawrence H. Summers, who was Treasury secretary in the final year and a half of the Clinton administration. The president-elect might name Mr. Summers, a highly regarded economist and a former president of Harvard University, as a senior White House adviser, people involved in the transition said.

 

Word of Mr. Geithner’s selection helped drive stocks sharply higher on Friday afternoon as investors concluded that Mr. Obama was taking steps to fill a leadership vacuum at a time when the economy and financial markets are showing new signs of strain. The Dow Jones industrial average closed up 494 points, a 6.5 percent gain after days of dizzying declines.

 

October 29, 2008

Trading stocks right now …

Filed under: Business — Tags: , , , — David Kirkpatrick @ 7:33 pm

requires quite a bit of testicular fortitude. And a casino roll doesn’t hurt either.

Wall Street had another astounding advance Tuesday, with the Dow Jones industrials soaring nearly 900 points in their second-largest point gain ever as late-day bargain hunters stormed into the market. The Dow and the Standard & Poor’s 500 index were each up nearly 11 percent.

There didn’t appear to be any one catalyst for the surge that saw the Dow nearly double its gain in the last hour of trading. Many analysts said investors were grabbing up stocks in the belief that the market had fallen too far in recent sessions; the Dow had dropped 500 points in two days. Some said buying early in the day came from anticipation of an interest rate cut Wednesday by the Federal Reserve, and the market just followed its recent pattern of building on its gains or losses in the last minutes of the session.

“There is nothing fundamental that came out today or yesterday that would take it up or down. We’re all groping for something meaningful to talk about,” said Bob Andres, chief investment strategist at Portfolio Management Consultants. “The market is exhausted from going down.”

October 24, 2008

Wall Street carnage continues

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:45 pm

Cover your eyes and hold onto your wallet unless you’re really into casino action. I will admit there’s probably some real bargains out there, but who can guess which companies will remain solvent to see the eventual uptick.

From the link:

Wall Street joined world stock markets in a selloff Friday, with the Dow Jones industrials dropping more than 300 points and all the major indexes falling more than 3 percent. The growing belief that a punishing economic recession is at hand had investors abandoning stocks.

The pullback on Wall Street wasn’t quite as steep as some had feared though the pace of selling increased in afternoon trading. The massive declines began overseas after another round of grim corporate news stirred fears about the world’s economy. Investors also grew nervous after a decline in index futures before the market opened was so steep that selling halts were imposed.

The anxiety Friday — demonstrated by the limits on futures and gyrations in everything from gold to the dollar — underscored the fear and uncertainty that has gripped markets since the mid-September bankruptcy of investment bank Lehman Brothers Holdings Inc. and the subsequent lockup in the world’s credit markets.

October 23, 2008

Stocks still very volatile

Filed under: Business — Tags: , , , , , , , — David Kirkpatrick @ 2:00 pm

The markets are just crazy volatileright now. Anyone doing any serious trading has either a lot to gamble with, or just gets a sick thrill out of outrageous risk.

From the link:

Fears of a global recession slammed Wall Street on Wednesday. The Dow finished the session down 514 points – its seventh-worst point loss ever.

The glum mood, sparked by weak corporate profits and falling oil prices, hit global stocks. Major markets in Asia dropped. Japan’s Nikkei finished the session 2.5% lower. European shares also fell in Thursday afternoon trading.

The Labor Department’s weekly report on jobless claims gave investors another reason to be nervous. Claims rose 15,000, to 478,000, for the week ended Oct. 18, which was worse than expected. A consensus of economists surveyed by Briefing.com had expected claims to rise to 465,000.

RealtyTrac, an online marketer of foreclosed properties, added to the market malaise Thursday with a report showing that more than 81,000 homes were foreclosed in September.

October 10, 2008

Looks like another tough day on Wall Street

Maybe not as bad as yesterday, but mid-afternoon numbers don’t look too promising.

These figures come from the WSJ website and are current as of 2:37 pm EDT.

Dow Jones Industrials down 5.76%

S&P 500 down 6.53%

Nasdaq down 5.37%

10-year note down 0.81%

I guessing everyone is noticing a trend in direction in these indicators.

Update 2:32 pm CDT — There’s a bit of a rally heading toward the bell today and both the Dow and Nasdaq are pushing positive numbers — less than 1% into the green, but positive.

One story that seems to be getting lost in all the financial freak-out is oil is dropping like a rock. Crude is now below $78 a barrel.

From the link:

Crude futures sank to a 13-month low on the mounting threat to global oil demand from the financial crisis.

Light, sweet crude for November delivery settled $8.89, or 10.3%, lower at $77.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 10, 2007. Brent crude on the ICE futures exchange closed at $73.65 a barrel, down $9.01.

Oil prices fell along with commodities from copper to corn, as well as the Dow Jones Industrial Average, which dropped for the eighth-straight trading day. Turmoil in the financial sector has resulted in a frozen credit market, cutting companies in the wider economy off from borrowing and threatening economic growth worldwide.

Final update 3:17 pm CDT — The markets close for the weekend and only Nasdaq held on for a gain. A 0.27% gain.

October 9, 2008

Brutal day on Wall Street

Filed under: Business — Tags: , , , — David Kirkpatrick @ 6:33 pm

Very brutal.

From the link:

Stocks fell sharply in late afternoon trading in New York on Thursday as concerns about the global financial system mounted and investors priced in a deep recession.

The Standard & Poor’s 500 stock index was down nearly 7.6 percent and the Dow Jones industrial average was down 678.91 points, or about 7.3 percent, both posting one of their worst days in post-war history. The Nasdaq composite was down 5.4 percent.

Wells Fargo, Morgan Stanley and other bank stocks were among the biggest losers and the financial sector as a whole was down nearly 11 percent in late afternoon trading. But the major indexes were also pulled down by big drops in stocks like Exxon Mobil, General Electric and Chevron.

September 24, 2008

Reserve Fund Management Company sued …

for some serious financial shenanigans.

Wall Street is becoming one odoriferous cesspool right now. Anyone who thinks this financial crisis is going away anytime soon — read: months or years instead of days or weeks — is deluded, a moron or incompetent.

If political polling holds up, the GOP faces hell to pay whether or not the blame rests on one party, or any political party for that matter. The crisis and public perception are two different animals all together.

From the link:

By the time the Reserve Fund reported last Tuesday afternoon that its Primary Fund money market funds had ”broken the buck” — that is, were no longer worth a dollar a share — investors had already withdrawn billions of dollars from the fund.

Some market analysts assumed they had reacted to the panic sweeping the market. But a lawsuit filed in Minneapolis late last week by Ameriprise Financial offers another explanation: The suit claims the Reserve Fund tipped some big customers about its crisis in advance so that they could get their cash out before its losses became public.

 

According to the complaint, two senior Reserve Fund executives acknowledged during a conference call last Thursday with Ameriprise that big investors had received an early warning.

The Reserve Fund executives ”seemed surprised that Ameriprise had not also been tipped at the same time,” the complaint alleges.

September 15, 2008

Big bank bust up

Wow. Merrill Lynch agrees to be sold to Bank of America and Lehman Brothers files for bankruptcy. The piper is being paid in spades.

From the link:

In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.

March 11, 2008

The law of unintended consequences …

Filed under: Business, Media, Politics — Tags: , , , — David Kirkpatrick @ 5:46 pm

in action. the NY governor falls, Wall Street rises. This is going to be my only post on the Eliot Spitzer situation.

From the Corner:

Dow Sees Biggest Gain in Five Years   [Stephen Spruiell]

The Fed’s latest injection of liquidity into the market, or a rampant outbreak of Spitzerfreude-related euphoria? I have to think the fact that everyone on Wall Street is in a good mood had something to do with it.

I think there’s actually something behind this little theory. Spitzer was roundly hated on Wall Street dating back to his days as NY’s attorney general.