The News From Wall Street!

[Dwight Drane]

How about that James Hardy...

 

Ain't it!

 

He is on pace for 80 yds on the season....but if he has 8 TD's...that'll work.

 

Did anyone notice the Michael Jackson, circa Thriller, jacket he had on in the post game interview? Now that was scary stuff.

 

Trust me...I hope I have to pay on that one. We need him to be servicable if we are going to make any sort of run. The question is, will I be paying in Ameros by January?

[Dwight Drane]

Now a separate question on this mess I don't know much about.....Did Gov. Patterson just do something idiotic by letting AIG into the till for $20 billion? It looks like NY makes the firms put up assets to back up the policies in the state, but how bad is NY in for it if AIG goes down? The $20 billion in assets might only be worth $6 billion the way things are going, but NY help is a drop in the bucket. That's just going to cover the service on the ratings downgrade tonight.

 

Before I rip into Patterson for trying to be a hero...what are the rules and expected payouts in NY if AIG is toast?

 

Thanks

[molson_golden2002]

Um, the laws of economics are most certainly natural, so long as there are sentient beings to make use of these laws. Do you think the field of mathematics is natural?

 

Also, FWIW you shouldn't reference Gilded Age economic downturns to prove your point. The federal government's policies of lending credits, imposing tariffs, and handling the money supply are what made those down cycles so awful. We haven't had full-blown economic depressions since the 1930's partly because the Federal Reserve Chairmen since then have been much more knowledgeable about the repercussions of their decisions. Even so, I'm not comfortable with having the entire economy of 325+ million U.S. citizens (plus the rest of the world) precariously subject to the decisions of one unelected person within the executive office. Seems like you are. Fair enough. But you strike me as someone who wouldn't disagree with anything the head of your political party of choice decides to do, though. I.e., you're a partisan idiot.

Ok pal, then tell me what down turns you were talking about that were made so much worse by the government interference. You made this silly argument, now back it up:

 

A summary of the basic laissez-faire premise would be that unnatural government interference in the economy actually makes these cycles MORE severe and not LESS as the great economic scholar

 

Which cycles are you talking about?

[GG]

Now a separate question on this mess I don't know much about.....Did Gov. Patterson just do something idiotic by letting AIG into the till for $20 billion? It looks like NY makes the firms put up assets to back up the policies in the state, but how bad is NY in for it if AIG goes down? The $20 billion in assets might only be worth $6 billion the way things are going, but NY help is a drop in the bucket. That's just going to cover the service on the ratings downgrade tonight.

 

Before I rip into Patterson for trying to be a hero...what are the rules and expected payouts in NY if AIG is toast?

 

Thanks

 

I think you made more sense with the End of Days prediction. The assets that are moving from the regulated subs to the non-regulated side are fine. In fact, most assets at AIG (and Lehman for that matter) are fine, because they are current in interest and principal. They have to be marked down because there's no market for them and that is what's causing the mess. So, the accounting boards and SEC can play god and save us from the Rapture by eliminating mark to market rules. Wow, talk about the power at the hands of bean counters.

[molson_golden2002]

http://biz.yahoo.com/rb/080916/goldmansachs.html

 

NEW YORK (Reuters) - Goldman Sachs Group Inc (NYSE:GS - News) said on Tuesday third-quarter earnings plunged 70 percent as one of the worst market slumps ever weighed on banking and trading results.

 

The largest U.S. investment bank reported net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.

 

"This was a challenging quarter as we saw a marked decrease in client activity and declining asset valuations," Lloyd Blankfein, Goldman's chief executive, said in a statement.

 

The results come as the year-long credit crunch gains steam. Six months after Bear Stearns collapsed and was acquired by JPMorgan Chase (NYSE:JPM - News), Lehman Brothers Holdings Inc (NYSE:LEH - News) on Monday filed for bankruptcy protection while Merrill Lynch & Co (NYSE:MER - News) rushed into the arms of Bank of America Corp (NYSE:BAC - News).

[TPS]

This is a good piece on the CDS risks and AIG. Probably need the NYT subscription.

 

AIG

[GG]

This is a good piece on the CDS risks and AIG. Probably need the NYT subscription.

 

AIG

 

Now people are getting worried about CDS because they finally made it into newspapers? Raise a hand if you even heard of credit default swaps before July 2007?

[meazza]

Now people are getting worried about CDS because they finally made it into newspapers? Raise a hand if you even heard of credit default swaps before July 2007?

 

*Raises Hand*

 

I got quizzed on it during an interview.

[TPS]

Now people are getting worried about CDS because they finally made it into newspapers? Raise a hand if you even heard of credit default swaps before July 2007?

 

So you didn't jump out a window...?

[GG]

So you didn't jump out a window...?

 

It would be very bad form this week.

[erynthered]

It would be very bad form this week.

 

 

If you did, I'd give you a score of 3.5

[John Adams]

Berkshire Hathaway is up 3% in the last 2 days.

 

This market isn't all about the losers.

 

http://money.cnn.com/2008/09/10/news/newsm...layton.fortune/

[molson_golden2002]

Berkshire Hathaway is up 3% in the last 2 days.

 

This market isn't all about the losers.

 

http://money.cnn.com/2008/09/10/news/newsm...layton.fortune/

Wells Fargo is kicking a@@ also!

 

http://finance.yahoo.com/q?s=WFC

 

Mayor Fargo would be pleased

[GG]

Looks like a mini-lifeline for Lehman has been tossed by Barclays.

[Typical TBD Guy]

Ok pal, then tell me what down turns you were talking about that were made so much worse by the government interference. You made this silly argument, now back it up:

 

 

 

Which cycles are you talking about?

 

Any severe economic downturn between Reconstruction and Wilson's presidency will suffice. Pretty much all of them involve a government interference trifecta of protectionism, overspeculation, and money supply manipulation. How about the one starting in 1893?

 

By the way, you saying it's a silly argument doesn't make it so. I have consensus opinions of credible historians, economists, and political scientists from which to draw; you, well, you have George Soros, Jon Stewart, and the Film Actors Guild directing your thoughts.

 

One more thing. Before I continue to engage in a debate with you, I'd like to see you do the following two things:

 

1. Acknowledge one policy Bush has had in the past 8 years that you think was good.

2. Mention one political issue where you think McCain is correct and Obama is wrong.

[Dwight Drane]

I think you made more sense with the End of Days prediction. The assets that are moving from the regulated subs to the non-regulated side are fine. In fact, most assets at AIG (and Lehman for that matter) are fine, because they are current in interest and principal. They have to be marked down because there's no market for them and that is what's causing the mess. So, the accounting boards and SEC can play god and save us from the Rapture by eliminating mark to market rules. Wow, talk about the power at the hands of bean counters.

 

I know nothing about the insurance industry....it just looked to me like NY was giving up claim to those assets in order to try and keep AIG alive so that the state wouldn't get a bigger hit with them going under. That is why I asked.

 

By eliminating mark-to-market, all you do is continue to prevent the end. It won't at this point help liquidity. The subprime loan industry was basically getting rid of mark-to-market on credit worthiness...and look where that ended up.

 

It doesn't make sense that the government would back away at this point after all the gimicks they have been pulling.....oh well. Fun to watch.

[TPS]

An interesting hypothesis on the futures market manipulations, and not the first time I've heard this...

 

futures manipulation

With foreign interest in increasing ownership in these institutions quickly dissipating and weak share prices unable to translate secondary offerings of stock into significant amounts of capital, some of the largest financial institutions were absolutely desperate to find a channel in which to raise significant amounts of capital (not hundreds of millions, but billions of dollars) very, very quickly. What just happened in the gold, silver and oil markets accomplished this goal, and thus may have been integral in preventing a global financial collapse.

[GG]

I know nothing about the insurance industry....it just looked to me like NY was giving up claim to those assets in order to try and keep AIG alive so that the state wouldn't get a bigger hit with them going under. That is why I asked.

 

By eliminating mark-to-market, all you do is continue to prevent the end. It won't at this point help liquidity. The subprime loan industry was basically getting rid of mark-to-market on credit worthiness...and look where that ended up.

 

It doesn't make sense that the government would back away at this point after all the gimicks they have been pulling.....oh well. Fun to watch.

 

The conspiracy theorists at Lehman are attributing lack of support to Paulson's nod to Goldman. They feel Lehman was a bigger thorn in GS's side than Bear, so there you have it. Realistically, Fed/Treasury had to draw a line somewhere. There's speculation that Barclays had the deal done on Sunday w/o Fed support, but UK regulators shut it down because they were afraid of continuing Lehman contagion on Barclay's books. Odd decision, because Lehman's assets were performing, but very illiquid. Giving them a safe haven inside Barclays would allow them to weather the storm.

 

Mark to market is not a good long term solution. But it would definitely fix the immediate liquidity issue. I can make an equally valid argument that it's a bit extreme to force long term asset writedowns through your income statement if you have no intention of selling the asset. That's what killing AIG now. Their book is not as bad as it appears, but the writedowns of non-marketable stuff leads to credit deterioration which forces collateral calls. This just feeds on itself because AIG now needs to frantically dump good assets and take down the market in its wake.

 

That's why you need everyone to take a step back and determine how much of this is real and how much of this is self-induced hysteria.

[Dwight Drane]

The conspiracy theorists at Lehman are attributing lack of support to Paulson's nod to Goldman. They feel Lehman was a bigger thorn in GS's side than Bear, so there you have it. Realistically, Fed/Treasury had to draw a line somewhere. There's speculation that Barclays had the deal done on Sunday w/o Fed support, but UK regulators shut it down because they were afraid of continuing Lehman contagion on Barclay's books. Odd decision, because Lehman's assets were performing, but very illiquid. Giving them a safe haven inside Barclays would allow them to weather the storm.

 

Mark to market is not a good long term solution. But it would definitely fix the immediate liquidity issue. I can make an equally valid argument that it's a bit extreme to force long term asset writedowns through your income statement if you have no intention of selling the asset. That's what killing AIG now. Their book is not as bad as it appears, but the writedowns of non-marketable stuff leads to credit deterioration which forces collateral calls. This just feeds on itself because AIG now needs to frantically dump good assets and take down the market in its wake.

 

That's why you need everyone to take a step back and determine how much of this is real and how much of this is self-induced hysteria.

 

Good points..thanks.

 

The Fed and the SEC suspended mark-to-market for quite a while. If I can find the SEC memo..it was quite humorous. "Mark to whatever you feel comfortable with" was along the lines.

 

The sad thing is, there is no end to this. We can delay it...which I guess can be argued as good. It gives even more time for those in the know to cash out though...and that was my big fluff from the begining. Give a doctor 10 more minutes to work with a bleeding patient and he may save a life. Give a bus driver the same 10 minutes and that bleeding person is as good as dead most often. Each of our individual financial selves is bleeding in this mess right now.

 

I just hope we get the football season in. We've waited too long to have another shot. I'll live in a dirt shack...but please God, let the city have a SuperBowl parade first!

[TPS]

By the way, you saying it's a silly argument doesn't make it so. I have consensus opinions of credible historians, economists, and political scientists from which to draw; you, well, you have George Soros, Jon Stewart, and the Film Actors Guild directing your thoughts.

Do they all happen to come from Chicago U or GMU or the Liberty Fund? Christ! Here's a simple one: look at the magnitude of recessions (the duration and severity) since government involvement was ratcheted up after WWII vs prior to WWII--on average, which were worse, before or after? Large government has stabilized demand so that servere downturns are prevented. That's an economic fact, it's not a value judgment.

 

The market system is not some ideal that if left alone produces the best of all possible worlds Candide. The nature of the beast is based on the profit motive and risk taking, and with a financial structure based on leverage and faith, you get periodic crises regardless of government's role. Imagine what happens to those crises as "capital" gets more concentrated, in both the real and financial sectors. And what exactly is government now? Governments operate to protect the people that line their pockets. So, in a sense, I agree with arguments to reduce the size and scope of government, because you are really talking about reducing the ability to protect "vested interests."

 

Aside: I have to laugh every time I think about the discussion of "capital formation" and supply side tax cuts. It appears the capital created was paper capital only...but it did create a lot of finance jobs.