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Buried in the financial news – a positive sign?

Monday, October 20th, 2008

From this morning’s Yahoo Business Report:

Strains in credit markets continued showing signs of easing after a raft of bailout measures by governments around the world, including a joint U.S. and European plan to buy stakes in private banks to boost their lending. Demand for Treasury bills, regarded as the safest assets around, lessened Monday but remained relatively high in a sign that there was still much fear in the markets.

While we’re not out of the woods by any stretch of the imagination, this is an very good sign. As I said in my lengthy post, What Happened? A Summary of the Financial Crisis:

But more importantly, watch the credit markets. These are not nearly as widely reported, but if you read market commentary sites, it will almost always mention how well credit is flowing. . . . When you see credit returning to the market place, that will be the first real sign that this crisis is coming to an end. Also, remember that it will be several weeks or months before the Treasury

Categories: Money Talk | Comments Off on Buried in the financial news – a positive sign?

This is Up, This is Dow…

Tuesday, October 14th, 2008

It’s not every day that the markets provide the financial media with the opportunity to use terms like Best Day Ever!, but that’s what happened yesterday and, if the futures market is any indication, today’s shaping up to be similar.

The reason? There were three: Hank Paulson announced yesterday that the U.S. Federal Government was going to make direct equity investments in the nation’s banks, the FDIC announced that it would insure all non-interest bearing bank accounts with no maximum dollar amount, and the Federal Reserve invoked Depression-era emergency powers that allow it to buy commercial paper, providing liquidity in a market that has seized up like an engine with a giant oil leak.

This is bad for a number of reasons and good for one reason, but the one reason it’s good trumps all the others, so I’m glad to see it happen.

It’s bad because it’s a step toward socialism. The federal government now has a significant, minority stake in our nation’s banks. And it is already using the power of that investment to tweak corporate policy – executive pay and severance packages (i.e., “golden parachutes”) are already restricted, and Senator Chuck Schumer (D-NY) is recommending that participating banks eliminate their dividends and “stick to safe and sustainable, rather than exotic, financial activities,” whatever that means.

It’s bad because despite all of these restrictions, it’s only semi-voluntary. From today’s New York Times:

Mr. Paulson outlined the plan to nine of the nation

Categories: Money Talk | 1 Comment »

What Happened? A Summary of the Financial Crisis

Tuesday, October 7th, 2008

UPDATE: Those who find this post informative should also check out What Happened? A Summary of the Homeowner Affordability and Stability Plan, a similar analysis of President Obama’s plan to re-stabilize the mortgage market

When I was growing up, I remember being told that The New York Times was written at an elementary school reading level, so that any reader could understand it’s content. Now, living in the information age, where The New York Times has morphed into a plethora of newspapers, wire services, aggregation portals, blogs, 24-hour news channels and pundits, it occurs to me that they really do treat us like elementary school children – they speak in simple words, and they lie to us about complex subjects (the storks bring babies, Santa brings presents, stop that or you’ll go blind…) in order to hide the fact that they don’t know the real answer or to save themselves the trouble of explaining a series of uncomfortable details.

I say this as a 15-year veteran of the capital markets industry, an active investor, and an avid consumer of current events news. I say it today, in particular, because we’re going through one of those periods in history that my kids and grandkids will ask me about when they read about it in their textbooks (or whatever textbooks have become when they reach that age). I say it because the information coming from my commonly-used information sources has been so scrubbed, so watered down, so sanitized, and so reduced to inaccurate sound bytes and oft-repeated tag lines that I literally can’t watch it anymore. I’ve resigned myself to learning a college course’s worth of material during each eight hour workday, and then surfing the internet for Hollywood gossip and watching TV for sitcoms and cartoons. In times like this, one struggles to keep one’s sanity.

As you might expect, my friends and family have come to me frequently over the past few weeks with questions about what’s going on at work, and what’s going on in the financial sector in general. I’ve probably written around 5,000 words on the subject in the last couple of weeks, explaining basic terminology, squashing rumors, and reassuring people who are understandably flummoxed by the amazingly complex problem we’re all facing. I don’t claim to understand it all (people much smarter than I have, in the recent past, successfully proven that they don’t understand it all themselves), but I hope I can provide a basic primer to help navigate this ever-changing drama.

This lengthy post is intended to be that primer – a place I can refer people to rather than typing it over and over again in response to frequently asked questions. If you’re interested, I encourage you to click through and read it, and then e-mail me with questions or comments. As time permits, I’ll update it as we go with new information and correct errors that others find in my analysis.

Two warnings, though: first, this comes from me and from me alone. While I’ll do my best to remain factually accurate and politically dispassionate, no one should take this as a statement made by or on behalf of my employer. I haven’t vetted it with anyone at work, and I can’t say with any certainty that some of my colleagues wouldn’t disagree with all or part of it. Second, it’s rather long. I mention this not as an apology, but to reinforce what should be an obvious fact – complex situations require a lot of words to explain them. Our news media, pundits, and politicians have repeatedly tried to violate this basic axiom, and have failed repeatedly. There are no shortcuts here. Get comfy and read awhile. And when we’re done, maybe we’ll talk a bit about the Tooth Fairy and the Easter Bunny…

Read the rest of this entry »

Categories: Money Talk | 30 Comments »

A week of funny images

Sunday, October 5th, 2008

Three funny images in the inbox this week.

Categories: Money Talk, Political Rantings, Random Acts of Blogging | 1 Comment »

McCain Can’t Catch a Break

Friday, September 26th, 2008

Check out the sponsored links in this article about John McCain deciding to attend tonight’s debate in Mississippi:


Yellow teeth? poor credit? Wrinkle Cream? Yikes…when it rains, it pours, huh?

As long as I have your attention, a quick thought on the last couple of days: Everything I’ve read and heard about the current financial situation says to me that we need the federal government to step in and help. I thought George W. Bush’s speech the other night was one of the best of his presidency – accurate, non-partisan, simple enough that “Joe Main Street” could understand it without being condescending. The key line was this one:

The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold. And we expect that much, if not all, of the tax dollars we invest will be paid back.

So while responsible citizens who pay their bills on time should not be burdened with bailing out wealthy bankers who made bad decisions, it also holds that responsible citizens who pay their bills on time should not be left unable to borrow money, keep their businesses open or send their kids to college because wealthy bankers made bad decisions.

Unfortunately, President Bush has spent more than 100% of his credibility and political capital at this point, so what he says about the bailout and the economy comes under almost automatic scrutiny and skepticism. Adding fuel to the fire is Congress, who appear more interested in posturing than in getting something done. The Resolution Trust Corporation (RTC) of the mid-90s is an obvious template here (in that case, by the way, all of the tax dollars invested were paid back, plus a small profit), and yet the parties bicker amongst themselves while the world waits and banks continue to fail. In his statement today, John McCain said it best: “much of yesterday was spent fighting over who would get the credit for a deal and who would get the blame for failure.”

These folks are not doing themselves any favors. Again.

Categories: Money Talk, Political Rantings | 2 Comments »

A Different Kind of Bailout

Thursday, September 18th, 2008

Ladies & Gentleman, Sir Andrew Lloyd Webber:

Andrew Lloyd Webber is offering free theatre tickets to bankers who have lost their jobs in the current financial meltdown.

Between now and October 15th, bank employees who visit the box offices of The Sound of Music and Joseph and the Amazing Technicolor Dreamcoat will be able to claim two free tickets for one of the shows on production of a P45 issued after September 1st, 2008.

Andrew Lloyd Webber said: “Both The Sound of Music and Joseph are feel good shows and I thought that free tickets might offer some respite, albeit for a couple of hours, for some of those people who have sadly lost their jobs in the current economic upheaval. All you have to do is present your P45 as proof at the box office and two free tickets are yours.”

The offer is subject to availability and terms and conditions apply.

That’s seventeen different kinds of awesome…

(Hat tip: Erik Hickman)

Categories: Money Talk, Random Acts of Blogging, Words about Music | Comments Off on A Different Kind of Bailout

Sunday, Bloody Sunday…

Tuesday, September 16th, 2008

This might be a good time to review my work history:

1991 – graduate college and take a job with the company now known as Accenture.
2000 – begin a two-year stint as an Accenture consultant to Merrill Lynch.
2004 – leave Accenture and join the Lehman Brothers IT department
2006 – leave Lehman Brothers and join the Bank of America Global Markets Back Office IT group

Recognize any of those company names from the news over the past couple of days? To say the least, it’s been an incredible weekend. Things no one ever thought would happen have happened, and have happened in quick succession. For some perspective: Lehman Brothers survived the great depression, but couldn’t make it through the sub-prime mortgage crisis of 2008. Explaining why that is true would take pages upon pages of blog posts, as well as a level of understanding that I don’t fully possess. Suffice to say it’s extremely complex, extremely depressing, and (much to the chagrin of the press and politicians in the days and weeks to come) not easily blamed on a given person or group of people.

I’ll leave the Bank of America / Merrill Lynch acquisition alone on the blog, since I’m prohibited from sharing anything I know about it that isn’t already in the press (which, to be honest, isn’t much at this point). But since Ken Lewis and John Thain said publicly this morning that the entire deal (from initial proposal to completion) took about 48 hours, I think I’m free to say this: all of us were shocked. Very few, if any, saw it coming. As an IT professional, that means there’s a whole lot of work ahead to figure out what it really means.

It’s time to roll with the punches, folks…

Categories: Money Talk | 1 Comment »

Calling Out Our Leaders on Oil & Gas

Monday, August 11th, 2008

Oh, for a politician who understands the financial markets…

Back in mid-July, President Bush lifted an executive ban on offshore drilling

Categories: Money Talk, Political Rantings | 13 Comments »

When is a Recession not a Recession?

Thursday, July 24th, 2008

This from last week’s Wall Street Journal:

Federal Reserve officials marked up their outlook for inflation and economic growth in their latest projections. But their estimates suggest little expectation that underlying inflation trends will deteriorate significantly through 2010.

At the June policy meeting, officials projected that the rate of economic growth by the end of the year would be between 1% and 1.6%, up from 0.3% to 1.2% in their April estimates. The 2009 outlook was unchanged, with officials expecting growth between 2% and 2.8%.

Fed officials marked up their inflation projections for this year, measured by the price index for personal consumption expenditures, to between 3.8% and 4.2%, up from the 3.1% to 3.4% seen in April. The outlook for inflation next year was 2% to 2.3%, up only slightly from the 1.9% to 2.3% from the April meeting.

Expectations for the unemployment rate, now 5.5%, was unchanged at 5.5% to 5.7%.

Translation:

Categories: Money Talk | Comments Off on When is a Recession not a Recession?

Gasoline – Cheap at $4.00 per gallon

Sunday, May 11th, 2008

My Uncle Walter, now retired in Florida, sends me about 50 Internet jokes a month (kinda makes you remember 1997, no?) Anyway, this one was the first in a very long time to actually make me smile. Not so much a joke, just a little perspective:

ItemCurrent Cost per Gallon
Gasoline$4.00
Lipton Iced Tea$9.52
Ocean Spray$10.00
Gatorade$10.17
Diet Snapple$10.32
Water$21.19
Whiteout$25.42
Brake Fluid$33.60
Scope Mouthwash$84.48
Pepto Bismol$123.20
NyQuil$178.13
Printer Ink$5,200

Let’s hope the first alternative fuel car doesn’t run on printer ink, huh?

Categories: Money Talk | 2 Comments »

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