Rolling US Economy Into The Shitbin Thread

(That was me who made that page, derr)

Asia currently diving: http://finance.yahoo.com/intlindices?e=asia

although with Restaurant Week getting extended for what, a month, it seems like at least some sectors are being hit.

it's extended every year (for select restaurants)

No, Black Swan needs to stay where it is, please, puddling around in an unwritten Tom Robbins book.

now wait a minute - reference, please?

"Why Most Things Suck" : an anthology featuring non-fiction by Thomas Frank, Jim DeRogatis, Chuck Klosterman, Jonathan Franzen, Rick Moody, and other luminaries.

So Wall Street got fucked today.

Besides, if this is a "black swan", how come it's like the 10th one this year?

Aw cmon, *everyone* in the banks has either read The Black Swan, or is aware of its central proposition--it's like a number one best seller (at least here in the UK).

I find the book quite disingenuous in some ways--he spends a long time talking about the fallacy of using the normal distribution in models, yet the idea of adjusting models to fatten out the tails of the distribution is almost as old as the Black-Scholes model itself. Taleb knows this--he's fully aware of what a volatility surface is.

There were clearly problems with the models people were using--severe and utterly retarded ones on the credit side--but The Black Swan is a straw-man argument.

so which upcoming story is worse ? oh easy for me to say it's this one, since I've had an acct there since February...

I'm returning to BoA now

Monday, September 15, 2008 - 2:01 PM PDT
Chase seen as a likely suitor for Washington Mutual
San Francisco Business Times

http://www.bizjournals.com/sanfrancisco/stories/2008/09/15/daily18.html?t=printable

J.P. Morgan Chase & Co. is seen as a likely suitor for Washington Mutual, which is staggering under huge mortgage losses.

Earlier this year, Chase made overtures to WaMu that were rebuffed. The New York bank reportedly offered a stock-swap buyout valued at $8 per share, although other reports put the buyout price at slightly more than $4 per share based on conditions such as contingent payments made based on the performance of WaMu loan portfolio performance. Instead, WaMu went with a $7 billion financing led by TPG Capital, formerly Texas Pacific Group, that valued WaMu at $8.75 per share. TPG structured the deal for its 13 percent stake in WaMu so that it’s made whole if the bank sells for less than it paid within 18 months of the April investment.

WaMu’s shares (NYSE: WM) closed Monday at $2 per share, down 26 percent. Last week, Chase was reportedly in advance talks with WaMu again about a potential deal.

Also fueling speculation on a WaMu sale is the board’s decision this month to oust long-time CEO Kerry Killinger, who resisted selling the thrift. He was replaced by Alan Fishman.

“Killinger was fighting to shrink the balance sheet and keep the bank independent,” Dick Bove, analyst at Ladenburg Thalmann, told the New York Post this week. “By adding Fishman, who’s known as a guy who can get a bank ready for sale, they removed an important obstacle.”

Other banks that have been cited as potential suitors for WaMu include Wells Fargo (NYSE: WFC) and HSBC.

Chase (NYSE: JPM) could be attracted to Washington Mutual’s large branch network in areas where Chase has none. Specifically, key growth markets such as California and Florida. San Francisco bankers have long said it’s only a matter of time before Chase operates branches in the Bay Area.

A sale is looking increasingly likely for Washington Mutual, possibly in a government-assisted transaction. Should WaMu fail, the government’s already on the hook for the bulk of the bank’s long-term debt that’s owed to the Federal Home Loan Bank in San Francisco.

“The cost to the FDIC if this company fails is likely to be quite high,” Bove told the New York Post, adding that such a huge bank failure could cost the Federal Deposit Insurance Corp. $24 billion. One factor in making the bank’s failure so costly is that most of the bank’s deposits are mainly from mass-market depositors with relatively small balances that are well under the FDIC’s $100,000 insurance limit. Bove said the average size of WaMu’s checking and money market accounts is only $5,200.

Bove suggests that the best solution for resolving the WaMu situation may be the sale of WaMu to Chase or another party with the FDIC agreeing to cover all losses above a specific threshold.

Last week, Bove issued a note to clients suspending his rating on WaMu, which was “neutral” at the time. He made the move, citing the company’s memorandum of understanding it had received from regulators. He also noted in the Sept. 11 report to clients that he doesn’t expect WaMu to return to profitability until mid-2010.

http://online.wsj.com/article/SB122148503202636197.html?mod=special_coverage

AIG Faces Cash Crisis
As Stock Dives 61%
By MATTHEW KARNITSCHNIG, LIAM PLEVEN and SERENA NG
September 16, 2008

American International Group Inc. was facing a severe cash crunch last night as ratings agencies cut the firm's credit ratings, forcing the giant insurer to raise $14.5 billion to cover its obligations.

With AIG now tottering, a crisis that began with falling home prices and went on to engulf Wall Street has reached one of the world's largest insurance companies, threatening to intensify the financial storm and greatly complicate the government's efforts to contain it. The company, whose stock fell 61% yesterday, is such a big player in insuring risk for institutions around the world that its failure could shake the global financial system.

AIG has been scrambling to raise as much as $75 billion to weather the crisis, and people close to the situation said that if the insurer doesn't secure fresh funding by Wednesday, it may have no choice but to opt for a bankruptcy-court filing.

"The situation is dire," a person close to AIG said.

This is "ironic" now right? It's not really funny, except that it kind of really is...

http://www.jeroenbours.com/gallery.php?type=work&uid=88

yeah, the Eurotrash demographic is still buying Manhattan real estate.

Don't know how many of these there are with access to funds. EU getting hit pretty bad too

Roubini can be a good read on some of this stuff. Over a longer time frame Galbraith

Haven't read black swan but Talebs other book is supposed to be a lot better?. Not really sure I agree with the concepts of black swans (Greenspan may be the swan himself, but is the post 9/11 debasement of the $ really a change in policy from anything post-1973? or even post world war two?)

Anyone read this? (I haven't - just saw it looking for something else)

http://www.amazon.com/Dollar-Crisis-Causes-Consequences-Cures/dp/0470821027

According to a Wall Street Journal bit, "Goldman posts sharply lower profit amid "marked decrease in client activity and declining asset valuations.""

Tracer, was your reference to this? have you been there?

WSJ:

London's commercial real-estate industry is more vulnerable than New York's because it has seen more building of office space in recent years. More than eight million square feet are being built in London's financial district. About 80% of that is considered "speculative," meaning the developer hasn't signed leases for it yet.

In London, Lehman leases a one-million-square-foot building in Canary Wharf and occupies 80% of that space, subleasing the rest. Lehman officials haven't announced plans for those offices. In New York, by contrast, there are only a handful of speculative office buildings.
[Bloomberg, Michael]

Michael Bloomberg

Still, stocks of companies that own Manhattan real estate were hammered. Merrill's biggest landlord in New York, Brookfield Properties Corp., saw its stock plummet 18% to $17.40 Monday as of 4 p.m. New York Stock Exchange composite trading.

In bankruptcy-court protection, Lehman's leases could be canceled, leaving landlords on the hook for gobs of space as job growth contracts. If Lehman gives up three-quarters of its roughly 2.7 million square feet of office space, the New York office vacancy rate would rise from the current 8.5% to 11.5%, a level not seen since the period after the Sept. 11, 2001, attacks, according to an estimate by Peter Riguardi, the New York president for real-estate brokers Jones Lang LaSalle.

That Bloomberg bit was a picture on my clipboard, not a quote attribution.

i wonder if my goldman sachs schoolmates will show up to class this week

haha oh shit i didn't realize that's some kind of howard stern thing

There were clearly problems with the models people were using--severe and utterly retarded ones on the credit side

lol credit risk "models"

The AIG rumors continue.

I've been told, by two different and both reliable sources, that since I'm a Nat10n4l C1ty customer - I better start shopping for a new bank.

So where, exactly, is it safe to open an account?

B of A, Citi

credit unions, my pocket

Wells Fargo seems to be doing all right. (Seeing as my basic day-to-day account is there, I admit bias.)

But yeah, credit unions = wise idea for any general savings etc. Gone that route for almost a decade now without regrets.

Whats the best bet for a day-to-day checking/debit account?

http://www.johnlewis.com/Magazine/Feature.aspx?Id=9

j/v/c... care to share any more? I'm with the same bank as you...

I honestly don't have any more than that. One friend that works in finance told me last night that he's heard rumblings about them being on their last legs. Separately, had a meeting with a client this morning that works in bank auditing and he threw out an offhand comment that "Nat10n4l C1ty customers might want to start shopping around". So, thats it. I can't seem to find any reliable info online yet though.

B of A, Citi

― akm, Tuesday, September 16, 2008 5:22 PM (38 minutes ago) Bookmark Suggest Ban Permalink

citi? are you sure?

No rate change

This thread is getting so much like a Depression-era comedy I expect Ned Sparks and Guy Kibbee to show up.

http://www.scoopjackson.net/dead_end_kids.jpg

so what are the odds the WaMu stage at Austin City Limits music fest will be renamed by fest time next weekend

How can this be happening?

How can it even be possible that we wake up on a Monday morning to discover that Lehman Brothers, a firm founded in 1850, a firm that has survived the Great Depression and every market trauma before and since, is suddenly bankrupt? That Merrill Lynch, the “Thundering Herd,” is sold to Bank of America the same weekend?

Just months ago, Lehman assured investors that it had enough liquidity to weather the crisis, while Merrill raised some $15 billion over the last year to shore up its balance sheet. Now they’re both as good as gone.

Last week, it was Fannie Mae and Freddie Mac that needed a government bailout. This week, it looks as though American International Group and Washington Mutual will be on the hot seat. We have actually reached the point where there are now only two independent investment banks left: Goldman Sachs and Morgan Stanley. It boggles the mind.

But it really shouldn’t. Because after you get past the mind-numbing complexity of the derivatives that are at the heart of the current crisis, what’s going on is something we are all familiar with: denial.

Indeed, it is not all that different from what is going on in neighborhoods all over the country. Just as homeowners took out big loans and stretched themselves on the assumption that their chief asset — their home — could only go up, so did Wall Street firms borrow tens of billions of dollars to make subprime mortgage bets on the assumption that they were a sure thing.

But housing prices did drop eventually. And when people tried to sell their homes in this newly depressed market, many of them had a hard time admitting that their home wasn’t worth what they had thought it was. Their judgment has been naturally clouded by their love for their house, how much money they put into it and how much more it was worth a year ago. And even when they did drop their selling price, it never quite matched the reality of the marketplace. They’ve been in denial.

That is exactly what is happening on Wall Street. Ever since the crisis took hold last summer, most of the big firms have been a day late and dollar short in admitting that their once triple-A rated mortgage-backed securities just weren’t worth very much. And, one by one, it is killing them.

http://www.nytimes.com/2008/09/16/business/16nocera.html

Because after you get past the mind-numbing complexity of the derivatives that are at the heart of the current crisis

It's pretty hard for me to get past that.

Denial = greed

The Fed in for 80% of AIG. Uh, thanks?

so what are the odds the WaMu stage at Austin City Limits music fest will be renamed by fest time next weekend

― 100 percent HOOS test (BIG HOOS aka the steendriver), Tuesday, September 16, 2008 3:01 PM (5 hours ago) Bookmark Suggest Ban Permalink

^^ asking the important questions

wake me when citigroup admits how fucked they are

now on ebay:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/16/bcnebay116.xml

Types at (MAJOR AMERICAN BANK) keeps phoning up our offices asking what deals Lehman Brothers were mandated on, "after all it would be a shame for those companies to have to suffer as a result of all this". Crazy kids...

Beneath the photo of the satchel is the comment from the seller: "I worked here for half of my career. Bought most of my stock at a weighted average price of $45 (£26). Enough said.

this is, like investing 101 DO NOT DO shit.

NYTimes: "Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company..."

If Enron could declare bankruptcy and WorldCom could declare bankruptcy, why the fucking hell can't AIG declare bankruptcy? And will we ever get a clear explanation of the necessity for this from the Fed? Not bloody likely.

It smells of bullshit to me too, but there is a qualitative difference between AIG, on which a number of other financial institutions depend or are at least closely linked, and the two corporations you mention, which dealt in commodities and can go bust without hurting anyone but themselves.

To be a fly on the wall:

Attending the meeting on the Capitol Hill were Democratic Senate leaders that included Charles E. Schumer of New York, Richard Durbin of Illinois, Christopher J. Dodd of Connecticut and Kent Conrad of North Dakota A contingent of Republicans was led by Mitch McConnell of Kentucky, the minority leader, and included Richard Shelby of Alabama, John Kyl of Arizona and Judd Gregg of New Hampshire. House leaders included John Boehner of Ohio, the Republican leader; Spencer Bachus, Republican of Alabama; and Barney Frank, Democrat of Massachusetts. Members of the leaders’ staffs were asked to leave the meeting shortly after it began.

"They all gone? Good. Uh, we're all fucked."

"Why Most Things Suck" : an anthology featuring non-fiction by Thomas Frank, Jim DeRogatis, Chuck Klosterman, Jonathan Franzen, Rick Moody, and other luminaries.

"Most Things Suck" was a great punk zine in Montgomery County, MD in the late 1980s that a kid in my chemistry class made. Anyway, back to the economy.

So AIG is like... nationalized?

nationalized insurance companies but no nationalized health insurance. sweet!

The company is a sizable investor in Asian development projects, from toll roads in the Philippines to Seoul’s international finance center. It is also a major investor in the Taiwan government. As of February, A.I.G. held $14.2 billion in Taiwan government bonds, 13.1 percent of Taiwan’s total issued government bonds.