Lehman on the brink?

They'll do due diligence.

I doubt BofA - I think their sights are on Merrill. But the Feds might force their hands - if WaMu goes to JPM, who is left for LEH but BAC? I heard Wells for WaMu, but there's just too much west-coast exposure for that - they'd have to divest everything. Wells will do a minor player like National City, or maybe a midling player like Wachovia.

When the dust settles, I'll be happier.

What's the deal with MER? They have 40% of the flow on the NYSE, making $ hand over fist in equities and private client. Their retail arm is substantial. LEH couldn't have said any of that. I don't see MER going down, but then I didn't believe LEH would either until very recently. What are the fundamentals behind all this MER chatter? Simply speculation that they didn't write down the whole book?

Even LEH we won't know the entire story until after it's over.

Wamu had runs on the bank this summer. Close source told me how much money's been pulled from his branch in a few days.

http://s.wsj.net/public/resources/images/MI-AS334_EXECS_NS_20080911184837.gif

LP1, MER is 6 feet under in CDO's. That's their business model. The rest is just show. It's like Hamlet. Something's rotten. The cash trades are a smoke screen. Bye bye baby goodbye.

Cooper Neff used to be 40% of the flow on the NYSE. And Island. Who cares? I can be 40% of the flow from m laptop. If I want to lose money.

> I have to laugh, there is still no deal yet and people are already saying that, this should be the
> bottom. This crazy, people 2 IB's gone within 6 months is not normal.

DCO, you just don't get it. This is good news, as HR staffs will add 50k jobs to process the layoffs, and they and the irish carpenters and pediatricians will buy the new condos. Its a done deal, buy now or be priced out forever.

This was making the rounds today:

Breaking News: Lehman To Be Acquired by Tooth Fairy

The market responded with enthusiasm to reports that the Tooth Fairy has agreed to acquire Lehman. The purchase price has not yet been determined and will be set by Dick Fuld wishing upon a star, clicking his heels three times, and being transported back to that magical place where Lehman still sells for over $70 per share.

In related news, Lehman has agreed to sell all of its level III capital, including CDOs, ABSs, pet rocks, baseball cards, slightly used condoms, and credit default swaps written by MBIA and Ambac. Lehman’s level III capital will be acquired for 150% of its face value by Tinkerbell, who will carry it off to Neverland to be fed to a crocodile.

Lehman is financing 90% of the acquisition at an interest rate that has not been announced; Tinkerbell’s up-front payment consists of a handful of pixie dust, three crickets, and a bullfrog.

Analyst Dick Bove estimates that the bullfrog could eventually be transformed into three princes and a pumpkin coach. The deal gives Lehman no recourse to any of Tinkerbell’s assets other than the Level III capital. If Tinkerbell defaults, Lehman’s successor entity will stick its hand down the crocodile’s throat and attempt to get it to regurgitate. The firm’s historical value-at-risk analysis shows that sticking your hand down a crocodile’s throat is completely safe.

Treasury Secretary Hank Paulson issued a statement: “I am delighted that SWFs (Sovereign Wealth Fairies) continue to express confidence in the terrific values represented by American financial institutions. As I have been saying since August of 2007, this shows that the crisis is now over.”

Meanwhile, the SEC has announced an investigation of mean, evil, bad short-seller David Einhorn. While out for a beer with a friend, Einhorn reportedly suggested that the Tooth Fairy does not exist and that wishing upon a star is not a wholly reliable price discovery mechanism. Christopher Cox, chairman of the SEC, said, “Vicious rumors attacking the Tooth Fairy will not be tolerated. Our entire financial system and indeed the American way of life depend on the Tooth Fairy and wishing upon a star. How else could one value level III capital appropriately?” The SEC is reportedly planning to set up re-education camps for short-sellers.

Lehman used to trade cotton back in the 1850's. Think that's how they started. They were accused of trading with the enemy during the Civil War. Operating in NY and trafing with the South. In the end they got a pardon from Grant. The original signed pardon hangs in the hallway to the executive dining room. I can't say if this is true or not. I just heard from somebody. On second thought, never mind, I'm just babblnig. It's late. I'm unreliable...

GraffitiG, hilarious!

GraffitiGrammarian -I'm still laughing.

You know what actually is pissing me off, people like Kudlow. If you have been watching his show, I'm sure you have noticed, his arrogance toward possible Lehmanm collapse. He keeps saying that it's not that significant, really. I wonder if he has thought about the thousands of employees, who will lose their jobs. Just another idiot, looking for corporate welfare.

No effect on Manhattan real estate. Don't know what you guys are on about. BSC, LEH contributed nothing to our economy. No excessive bonuses based on excessive risk-taking. Nothing like that. Doesn't matter that thousands of new very expensive condos with granite countertops are coming online right at the very time that there's nobody around to buy them. If a tree falls in the woods, it obviously doesn't make a sound.

Steve, you're forgetting the best line of 'em all in layoff periods - "They'll just get jobs at other firms that will handle the work that used to be done by their former employer." This is especially widespread in law firms when they cut back or go broke (remember Shea Gould?). It takes at least a year for people to realize that there are no comparable jobs across the street.

As a former Price Waterhouser, to compare statutory work like audit (Andersen) with trading or deal-making is just plain nonsense. Companies MUST be audited, and if one firm goes under the business does need to go somewhere else. But not at the highest levels - legions of junior CPA's are needed to audit companies, but not legions of partners and directors. High-level is what suffers there. (Witness Ernst & Whinny's takeover of my former employer Arthur Young.)

There's only so many traders a bank needs, until all their traders start trading with each other, which is stupid. Hedge funds are closing. The problem with the independent investment bank / mortgage lender model is FUNDING: where do they get their money from?

Banks. And banks are not lending, and if they have their own investment banks / mortgage lender, why fund another one?

Don't know how substantiated this is, but: friend at Lehman was told the layoff package would be 3 weeks per year of service plus 2.5 months of payroll.

How can they know that at this point? Anyone else inside with info?

LP1,

Leh supposedly laid off 1,500 folks on Tues, so that may be the info your friend is referring to.

That's what I was thinking KISS. Which means you may get a better package if you were laid of on Tuesday then you will come next Monday morning. :-\

Hank Paulson on the wire saying that Fed/Treasury will not backstop a deal

Article from the FT saying that BofA, JC Flowers, CIC planning a joing bid:

http://www.ft.com/cms/s/0/f3586ede-80ca-11dd-82dd-000077b07658.html

"They'll just get jobs at other firms that will handle the work that used to be done by their former employer."

Yes, and hedge funds will increase their staffing 100,000% to hire the rest.

According to Barbara Corcoran, none of this will affect Manhattan real estate.

On the other hand, we are starting to see some good news on the inflation front - oil falling, probably stabilizing at $80 a barrel - and other commodities as well. Inflation is under control in China and Brazil, which are growing handsomely and should help the basic materials sector, and hence the stock market. If a deal is made for LEH at approximately $5 per share with no government backstop, that should inspire confidence among investors that we are truly coming to the end of the credit crunch. WaMu now has two options: sell itself to JPM, or be taken over by the FDIC, because I anticipate a run. I don't think the government wants to take it over, so watch for an "encouraged" deal in the near-term.

That will leave too-big-to-fail Citi, which luckily has gazillions of assets it can dispose of (I never understood its business model anyway) and Merrill, which to me is the big mystery in all of this.

"According to Barbara Corcoran, none of this will affect Manhattan real estate."

Thank goodness! Tonight, I will sleep like a baby....

Nothing can affect Manhattan property prices. Of course this apartment costs $4,200 to rent:

http://www.nybits.com/apartmentlistings/c8dd0d93d4a6d8e680ec3c46a6217eae.html

and it would probably cost $2.2 million to buy:

http://www.streeteasy.com/nyc/sale/231592-condo-310-west-52nd-street-clinton-new-york

for a total carrying cost of about $13,358 (until property tax kicks in).

But never mind - it's worth the premium to own because you get that over-price locked in forever!

steve, thanks for posting the same misleading comparison on two threads. Why leave out that you are comparing apartments in two different buildings? Also, why leave out that with respect to the 310 W52nd Street buildings, an apartment in the building with the same layout is asking $7500 to rent?

"an apartment in the building with the same layout is asking $7500 to rent?"

Why would you rent an apartment for $7500 when you can get a virtually identical one for $3995?

And even at that rent, you'll still be out $7,500 a month if you buy it at that price and factor real estate taxes back in.

guys, one thread is enough, and you should stop this nonsense on that one, too.

Back to Lehman.

Gonna be a rough weekend...

I don't think. I will go out on a limb and say Lehman is not going to another Bear Stearns. Lot of suitors, unlike Bear Stearns, and no immediate credit crunch so a deal should happen. Even if doesn't happen, Lehman can sustain on its own for the foreseeable future.

"Lehman can sustain on its own for the foreseeable future"

Not if it gets downgraded. Its borrowing costs will rise, and it will have to post surety bonds on all the swap contracts it has entered into. It will be forced into bankruptcy.

Any of the deals being talked about are Bear-style or worse. Because the Fed doesn't even want to guarantee.

Make no mistake, this is another Bear. Lehman will be no more, and add another 8k layoffs to the pile...

If the most recent press releases (Sunday am) are any indication, it will be much worse than Bear.

Actually, this is worse than Bear because there is no government guarantee. If the firm is dissolved, everyone will lose their jobs. If Barclays takes it over, it will be eviscerated. The best hope is BofA, but I still think they're more interested in Merrill.

Of course none of this will have any effect on Manhattan real estate. Ask Barbara Corcoran. The Europeans are flooding in. I just got back from JFK, and every flight from Moscow is booked.

And my Irish dentist and the guys in his practice are all buying at the Plaza.

How can these companies each agree to front $3B? I mean really, how in the world can Merrill justify contributing 3 Billion, only to be next. It's is quite possible that a deal is not made and Lehman becomes the first real failure. Unlikely, but definitely possible. We will see shortly.

dco, it's the brilliant Bush administration, which sat by when all of this was going on. You know, The Free Market Economy: they didn't tell them to stop drinking, and now they're asking the other drunks to drive.

You know, it's not the fault of Freddie and Fannie management or board that the firms took all those risks.

You know, $20 million to Stan O'Neal, and Kerry Killinger, and Ken Thompson from Wachovia, who turned down the deals that BofA took (Fleet, MBNA) and instead bought Golden West. What he really got was a golden shower.

Here's how it was billed:

May 07, 2006. Wachovia to Acquire Golden West Financial, Nation's Most Admired and 2nd Largest Savings Institution

http://www.wachovia.com/inside/page/0,,134_307%5E1344,00.html

NATION'S MOST ADMIRED! With all those option ARM's.

Being reported that bofa and barclays have pulled out. Not looking good... unless the govt offers guarantees.

what time do Asian markets open?

BofA is still involved. Barclay's is out. BofA is offering to front Lehman's swaps, which is an encouraging sign.

I believe Tokyo opens at midnight.

Frequent posters on Streeteasy know everything. Others - occasional posters on Streeteasy, and those who actually work for a living and don't use Streeteasy, know nothing.

... to summzrize

Much worse than Bear.

No equity value
No jobs
No severance packages
No bonuses

I believe employees are ahead of general creditors as far as accrued wages (incl accrued vacation pay) are concerned. But let's be clear, this is far worse than Bear. For Bear employees, there was real benefit to being first.

It's a 13-hour time difference with Tokyo. 6:35pm New York = 7:35am Tokyo. They are already dealing with this. Think of all the wealth that has been destroyed this year - and all that will be destroyed before the end of the year. The blood on the street will be waist deep.

Steve's favorite line:
http://www.nytimes.com/2008/09/15/business/15street.html?hp
Even employees who manage to hold on are likely to make a lot less money this year. Bonuses are not only going to decrease; for many, they will evaporate completely.

DOW off 300 in futures trade:
http://www.bloomberg.com/markets/stocks/futures.html

Gonna be a week for the history books...

this does sound dramatic.......

I have friend who got laid-off from LEH earlier in the year. Turns out he was lucky - he got a nice severance package. The people who got to keep their jobs....they're out and left with nothin'. Even the stock they were paid as bonuses over the last few years are now worthless. Essentially they've been working for free for the last few years. Very, very sad. Worst of all, many of them will not have a place to land. At least some of the Bear employees were absorbed by JPM. I don't think many people understand how dramatic this will be for NYC.

I really don't understand how it will be so disastrous for NYC, and I'm not being facetious. I would like someone to please explain.

Yes, all this turmoil will be disastrous for the thousands, perhaps tens of thousands who will lose their jobs. Those who have been accustomed to dipping into an endless money pit to support extravagant, opulent lifestyles will obviously have to adjust to a new way of life. And yes, I understand the theory of trickle-down economics: less disposable income for the big boy on Wall Street means less money to spend at the restaurant, which means less money that goes to the waiter, who has less money to spend at the shoe store, etc.

But to what extent will this be DISASTROUS to the vast majority of humans who live here? Not to those earning exorbitant sums of money whose life is tied directly to the financial system - the way those will suffer, I understand. But through all this, the Dow has hovered between 11 and 12 thousand - off its top figure, but still significantly higher than a few years ago (remember when Dow 10,000 was the rallying cry for extraordinary wealth in our time?) I have yet to hear about massive layoffs in any sector OUTSIDE of the (relatively) small percentage of New Yorkers employed at big investment banks. The price of oil continues to come down (barring hiccups from hurricanes.) I do not, as you might expect, have any background in economics. But while everyone in the financial pages of the paper and the internet are talking about a cataclysmic disaster unseen since the Depression, everyone else is kind of just...living their lives. Those who didn't make billions off hedge funds and investment banks are not losing billions now that those entities are falling apart. Now, those who made seven-digit salaries by trading paper might have to get productive jobs that actually do something, just like everyone else.

What is it that I'm not understanding? Are all the worriers screaming 'fire' because their own house of cards is burning - or is this going to cause mass destruction to EVERYBODY ELSE. I have read and read and asked and asked and other than the understandable impact of trickle-down economics impacting things when a few thousand former Wall St employees no longer have discretionary income to throw around, I don't quite understand how this crisis is going to end the world as we know it.

And frankly, I suspect I'm not alone.

You are not alone. Great questions. I hope someone posts some answers.

But the panic is SO widespread on every page of the paper (not just the financial section) that I think I must be the one who is naive. I must be missing some piece of the puzzle to think that the collapse of huge investment banks means the collapse of huge investment banks, and the resulting loss of thousands of jobs for employees of those banks - but what else? How does that impact REGULAR PEOPLE, especially when you consider a stock market that has stayed near record highs throughout this year-long catastrophe and the now almost 3-month decline in oil prices. Isn't that what most people care about, and isn't that what impacts their lives - much more than whether some hotshot trader on Wall St. who used to make a million bucks a year is now out of a job?

In plain English, exactly what is it that all the experts and pundits who 'have never seen anything like this before' fear is going to happen?

I may not know much about economics, but I do understand a little bit about human psychology. And there seem to be two factors at play here. One is the tendency to project your own problems onto others. For people in the financial world who looked at a company like Lehman as the bedrock of their industry, to see it collapse must shake the very foundations of their universe - the same way a religious person might be if someone he thought was the Messiah turned out to be a fake, or the way a child might react if his parent died. It's easy, then, to feel as though your own personal tragedy has widespread implications for the rest of humanity, even if it has nothing to do with them at all. The difference between the two examples is that if your parent died and you went out onto the street and screamed and yelled and cried about the incredible tragedy that just unfolded, you'd eventually realize that the tragedy is very much your own, and scarcely impacted anyone else. In the case of the financial market, since so many people, so many POWERFUL people, connected to media and the most influential segments of our society, looked to the financial world as their parent/messiah, they can all rally together and make a lot of very loud noise about how tragic it is for a very long time when something goes wrong, without realizing that maybe it doesn't impact everyone outside of their little cocoon as much as it aggrieves them.

The second aspect that seems to be at play is mob mentality. How many people outside of the financial world really understand how and why the collapse of big investment banks spells such dire doom for the rest of America? Probably not many. But they hear it trumpeted over and over again on tv, on the internet, and in the paper, and so they assume that yes, this whole credit crisis is a very big deal indeed. Even if no one can articulate why.

Incidentally (and particularly since we're having this discussion here on Streeteasy), I CERTAINLY understand how the national precipitous decline in house prices has affected 'regular people'. Obviously, for most people, their home is their biggest asset and investment, and the loss or devaluation of that asset can be disastrous. But it's the housing crisis - whose deleterious impact I understand and respect - that precipitated the credit/investment bank crisis (who were too heavily leveraged in mortgages), not the other way around. It is that crisis - a result of the housing crisis - whose subsequent impact, I simply do NOT understand.

SomeonewhoKnows- I think you're right, keep moving nothing to see here. No worries.

Thanks for the sarcasm.

I really meant the question seriously. I genuinely would like to be educated by someone patient and informed enough to teach. As you might have guessed, I do not have a background in economics or business, and while some of the implications of the crisis are understandable, on the whole, I really don't get what the fuss is all about, or how it severely impacts the vast majority of Americans.

SomeonewhoKnows, real estate and finance and married because most properties are purchased with borrowed money. The entire real estate run-up over the past 10 years is directly tied to Wall Street's use of derivatives in the credit market (mortgages and other loans). Without Wall Street I'd say at least half of the people who bought in the past 10 years would not have been able to buy anything near what they bought. Wall Street was a dream factory making every homeowner's dream come true. That dream is over. Wake up. The world will not come to an end. No Y2K planes falling from the sky. Just a lot of crying.

OK, but doesn't the government's bailout of Fannie and Freddie insure that lending will continue on a wide-scale?

I understand that lending standards were particularly lax in the past few years, and the past year has seen something of an over-correction, such that borrowers who really should qualify for a loan are being turned away. Eventually, I would assume, that will stabilize into a situation that really inures to everyone's benefit: the charlatans who were taking advantage of 'liar's loans' over the past few years will no longer be able to borrow, and those who really are credit-worthy will be able to proceed as they did prior to the bust. The evaporation in the immediate available in credit and the widespread panic will (and has) cause something of a correction in prices, but that, too, I imagine, will stabilize to something approximating the 'true' value of real estate. So many studios won't sell for $500 or $600 K anymore, but is it really a cataclysmic collapse that we should be anticipating and fearing? Won't we just revert back to the 'correct' standards of lending (which, granted, look like a severe credit-tightening compared to the free for all of the last few years) rather than a situation in which no one is able to borrow?

Beyond real estate, I'm also trying to understand how all of this so severely impacts regular people. The ones who didn't make millions in the glory days of investment banking, and who aren't losing millions now. Why should they care that exceedingly wealthy people and companies who buy and sell paper for a living now have one fewer partner to trade with? How will Guido Vonducci who owns a pizzeria in Bay Ridge be affected by the loss of a few thousand, or even tens of thousands, of jobs on Wall Street?

No panic. BofA is paying above book for Merrill. It's the end of the financial crisis, the beginning of the Manhattan real-estate crash.

Who's left to buy?

-50%.

No bonuses at Bear, Lehman, Merrill. So why should Goldman & Morgan Stanley offer? Morgan Stanley will be sold to HSBC in a week. I don't know about Goldman. WaMu will be JPM w/i 2 weeks.

But still, no one can compete w/ BofA & Merrill & Countrywide & MBNA & Fleet & LaSalle.

Kudos to Ken.

Lehman's bankruptcy is just a tragedy. I know many on these boards have called (and I believe correctly) for the correction in nyc real estate. But the dismantling of a 158 year old institution and the thousands of jobs that will be lost is just a tragedy. These aren't just a number to be put into the calculation for how much I can save on a 2 bed/2 bath in UES. These are real lives and real people with families and hopes and dreams like everyone else. I can't help but think if Fuld had been less adamant if he could have done what I believe Thain wisely did - sell Merrill before it's too late. This was no Bear. Fuld had plenty of time and ability to right the ship but he was in denial.

I have friends at Lehman, worked with many there and it's just a sad day.

steve, you don't know what Bank of America is paying. Dealbreaker.com says it might be an all stock deal which would bring the value down a lot.

Someonewhoknows:

I am not an expert either, but I know a bit having worked in finance since getting out of college in 1999. I think the "crisis" for the country, normal people, Guido's pizzeria, economy is vastly overblown. There will be some effects, as you point out, but I don't see any meltdown, rioting in the streets, great depression, etc.

However, I do see the bursting of both the credit bubble and the housing bubble (I know, no great revelations there). The bursting of the credit bubble means people will have to stop buying stuff they can't afford (which they shouldn't have been doing in the first place) and will have to tighten their belts. The bursting of the housing bubble means evaporation of vast wealth (which was also never really there since much of it was a ponzi scheme), as well as a huge downturn in construction, building products, and anything else related to the housing industry.

The problem with the media is that the confuse the bursting of a bubble (which is inevitable and healthy, if somewhat painful), with "disaster", party because they don't know any better, and partly because sensational headlines sell better.

I think the point many on this message board are making is that these bubbles had a huge role to play in the run-in in Manhattan real estate prices, and so their bursting will be "disastrous" for Manhattan RE prices. Of course, that's good news for the many people who will be better able to afford housing.

newbuyer99, "people will have to stop buying stuff they can't afford"

which means the economy will stop growing. Just ask Ford or GM what happens when people stop buying on credit. Or ask a real estate broker.

Absolutely, I never said it wouldn't. I just don't think "economy stops growing" = "disaster".

Guido's pizzeria buys his material on credit. He borrowed at a low rate of 5%. He could do that because his loan was pooled together with hundreds of others and sliced up in various ways to others. Sensationalist journalists call it alchemy. But its just finance. Guido's pizzeria's customers also use credit cards. They can borrow so low, because Amex that loans them money then pools these into ABS. Guido gets cheese from Kraft, who borrows millions in the debt and stock market at a pretty low rate and passes the benefit along via lower cost of cheese. Guido sits in... say a mall, that was built by Simon property group. Simon took this lease and other commercial assets and sold to wall street that packaged it into more securitized loans or it would never have been able to construct the mall. Now if Simon were to default, and their assets were liquidated, Guido's pizzeria may not have a place to sit in.
I could go on.. its all intertwined. The whole economy depends on the ability of efficient capital markets meeting demand and supply.
And I didnt even go into the multiplier effect....

> These aren't just a number to be put into the calculation for how much I can save on a 2 bed/2 bath
> in UES. These are real lives and real people with families and hopes and dreams like everyone else

And it wasn't "real people" who couldn't afford those apartments with all the ridiculous speculation?
It wasn't "real people" who were priced out of the market?

Trust me, lots of real people suffered before the bubble burst...

Yeah, despite being someone who has devoted his adult life to rising out of the lower-middle class and realizing significant wealth, I think all of this 'sadness', this shaking of the head, this crying out of how 'sad a day it is' because so many Lehman people will lose their jobs, is a bit preposterous.

We're talking about people who have been earning MASSIVE amounts of money for, in most cases, years. People who made annual bonuses that eclipsed what most 'regular' people earn in a lifetime. And those regular people have been suffering for a while with high gas prices, decline in home values, rise in unemployment, etc. What was the result of all of Lehman employees' largesse when their countrymen suffered? Did charitable contributions rise from Lehman employees after the general economy started to take a hit? Were they inclined to share their heretofore good fortune with everyone else? No? Why, because they earned it themselves and were entitled to keep it? OK, fair argument. But don't expect everyone else to cry for you when your place of employment goes belly up.

All IBankers had an exceptionally good run for many, many years. Now their very industry is imploding before their eyes. It's really hard to feel sympathy for those who were eons ahead of everyone else on the earning scale suddenly coming crashing down to earth. Maybe this all will be a good thing, as the very intelligent, very well-educated former workforce of Bear, Merrill, Lehman etc. set their minds on new sources of income that benefit society as a whole.

Rational -

I genuinely appreciate the down-to-earth explanation, and I understand that all aspects of the economy are intertwined and there is a trickle-down effect, and that the Wall St collapse will have SOME deleterious effect on Main Street. But nobody is talking about corporations that produce products everyone needs (like Kraft) going out of business. Nobody argues that there isn't enough retail space in this country and laments the fact that nothing more can be built. Nobody argues that credit cards are going to suddenly become extinct and regular elements of society will have to go back to using only cash that they have, rather than credit they can borrow. All of that might be somewhat more difficult to come by, yes, but how much more difficult? Maybe back to the levels they were at before the boom of the last 8 years? Nobody was arguing in 1999 that it was impossible to conduct business because or thrive because the Ponzi scheme that was the real estate explosion and the ease of credit hadn't yet occurred. Unless we're seriously talking about bread lines and losses of consumer deposits at standard banks, a la the 1930s, it seems like the whole 'catastrophe' that everyone is concerned about is a 'correction' of the lax, free-for-all credit/money/rising value of the last few years to a more reasoned, rational, sensible time.

Is that really such a bad thing?

SomeonewhoKnows,

I see what you are getting at but I don't think many people are going to be in favor of this being a good thing. It has touched almost everyone in regards to what they can afford (ability to borrow or inflation) and their wealth (stocks, RE, pension, 401k, etc...). But no one likes to see large institutions go down in flames. No one likes to see their portfolio loose at double digit rates. No one likes to loose their home or their job (let alone someone they know). No one likes to realize they can’t afford to go to work because gas costs over $4/gallon. No one who lives off of welfare likes it when groceries costs go up double digit rates from just a year ago. No one likes it.

So is this really a bad thing? Prolly not. But it ain't looking pretty. And no one likes it. And when you have enough people not liking it, people start to do things that just makes things get worse. A softening recession would have been good. These crazy insane events like this just fuels people to do things in unison that make a softening recession, and bad one.

Well... thats how I see it. Who knows if that may be the case.

Jac,

Good analysis. No question that mob mentality becomes a self-fulfilling prophecy wherein things get worse just because they are collectively bad. Obviously, I am not celebrating the loss of jobs and increase in cost of material goods. Nor do I think any correction from the 'good times', no matter how unreasonable they may have been, is cause for widespread happiness. I am just trying to understand - from a layman's perspective who has zero background in economics - how and why the collapse of enormous companies, venerated, celebrated, and long-established as they are, will necessarily yield to the kind of cataclysmic and widespread destruction you get the sense from the pundits that we are heading for.

SomeonewhoKnows,

Widespread destruction? No. Widespread implications? Yes. I am no economics wizard myself, but maybe this article can help connect the dots.

"Wall Street's troubles are yours, too Lehman, Merrill - even Goldman - got levered up to their eyeballs during the boom. Now they, and the rest of us, are paying the price."

http://money.cnn.com/2008/09/14/news/economy/source_of_the_crisis.fortune/index.htm

I think something is being lost here!
Lehman doesn't only employ investment bankers who make huge bonuses.
They also employ secretaries, mailroom clerks, bookkeepers, computer
technicians, janitors, people who order supplies, people who do
maintenance on the computer. And they all get bonuses, though not
in the six-figures.
When you take an entire company and put all its employees on the street
at the same time, that translates into long lines at the Unemployment
processing centers, and lots of resumes flooding every single job
posting at every level.
When a secretarial position opens somewhere in the metro area, the
competition becomes as fierce as though Lehman were looking for a new
CEO.

Then there's the car services that take people home after working late.
And the restaurants that deliver food to the offices after hours.
And the lunch joints where employees drop $10 every day.

The problem with this country is people think if it ain't my ass
getting whupped it ain't bad news.

"Yeah, despite being someone who has devoted his adult life to rising out of the lower-middle class and realizing significant wealth, I think all of this 'sadness', this shaking of the head, this crying out of how 'sad a day it is' because so many Lehman people will lose their jobs, is a bit preposterous."

SomeonewhoKnows - i really don't think you are someone who knows. you have this grade school stereotype of wall street as chock full of rich, overpaid banker/traders who went around the city flashing their amex black cards and living the champagne & caviar dream. sure, there are those type of people at these banks. but there are many others who are not like that and have worked very hard for what they have.

i'm not crying a river for guys worth $15mm that are now only worth $2-3mm. but you're 'regular' people reference is just silly. if you want to say "the average earner" that's one thing. lowery has it spot on - there are SO many back office, accounting, mailroom, secretaries, junior front office people, etc that will now be out on the street. many of these people will come across hard times and you take this opportunity to belittle them. nice job.

you're stereotype demonstrates your lack of understanding for wall street and quite frankly your posts also demonstrate your lack of understanding of the issues at hand in general in the credit crisis/economics/business cycle, etc.

Someonewhoknows:

My two cents. The upshot of all the bad news is increased caution among all lenders. The simplest way I can put it is that if the credit crisis doesn't get resolved - - any every bankruptcy makes the high-quality, careful, surviving lenders MORE cautious in their lending - - the availability of credit will continue to contract at a rate and with a stubbornness we've never seen before.

It's not the effect on the BAD banks' behavior that's the issue. It's the increasing caution of the GOOD banks.

At its worst, any and every credit card issuer has the option of freezing credit limits on their cards. It is possible we could wake up some day and have our credit cards, one by one, lowering our credit limits to our current balance, meaning no future charging until the old balances are paid off. Imagine the turmoil. That's a worst-case example of where we are headed if this credit crisis and deleveraging and capital destruction isn't headed off.

THAT's the extreme. Hopefully unlikely. But every credit card in your wallet can be shut off at the bank's will. That's part of the game. Imagine the turmoil if that happened. Imagine what Christmas selling season would look like.

Now, all the US Federal parties -- Fed, SEC, Treasury -- are extremely motivated to stop that from happening. But just like Bank of America, Barclays, Goldman, and Morgan Stanley could exercise free choice and walk away from helping Lehman (which would have been for the good of the system), the banks can tighten and tighten credit to starve out their competitors. If they starve out the economy while they're at it, they may just consider that, for the sake of having the playing field all to themselves.

Remember what it was like 10- and 20-years ago with consumer credit. Cards were hard to come by, and rates were high. It's only recent years -- with the repackaging and securitizing of credit -- that many banks have competed to lend to the consumer, rich or poor. That is entirely a reversible process.

In regards to Lehman folks who were worth $60 million a year ago on paper they are now worth $250,000, if that. The shit is really hitting the fan. Those that aren't toast are now fessing up that they will be.

NYC will be a fire sale by the second half of 2009.

kgg - "NYC will be a fire sale by the second half of 2009."

You're right. No question about it any longer.

By the way, if LEH employees were getting severance and layoff packages a week ago and a month ago what happens to the one that are let go now? How do they get paid?

The ones that are let go now probably get nothing in a Chapter 7. It's unclear whether those that got severance packages (that are still being paid out) will get all of it either.

This thread opened with a couple comments regarding Lehman stock:

Special K "Sort of crazy that it's trading at under $9 right now"

dco "That's because it's worth about $2"

Right now it's trading at 20 cents. Could be a ten-bagger if you're right dco.

Actually my point is this mess is much messier and dire than anyone (except Stevejhx perhaps) ever thought. It's possible Steve is right we might look back at 2007 prices and realize everything
on the market was DOUBLE it's sustainable value. Half the prices on apartments and they still don't really seem that cheap. Just rewind the psychological conditioning of the last few years.
It wasn't so long ago Manhattan townhouses were a million bucks or a classic seven cost $850K.
Our reality will be revised over the next couple years for sure.

Special K - You're right that I don't understand Wall Street or the issues at hand. I've been abundantly clear about that, and that's why I reached out asking for someone to explain it.

And yes, you're also right that I should have differentiated between the upper echelons and lower-caste workers at any particular business. Obviously an enormous number of those employed by big investment banks are blue collar workers who face real turmoil now that they're out of a job, and the situation is dire for those individuals. Life is also slated to get tougher - though not impossible, not EVERYONE is getting fired - for some of those whose businesses represented a support industry for those in the financial business (restaurants, car services, etc.) But overall, the percentage of blue collar workers that that represents is quite small. I read that Wall Street employs only 6% of NYC's workforce, and even if 20% of those jobs disappear (an incredibly high number), that still represents a small portion of the total workforce, many of whom could probably find employment in the thousands of job listings posted in page after page of the New York Times every day. In a different industry perhaps, and maybe with a pay cut, too. But the fact that a 30 year old investment banker who used to make $5 million is now out of a job doesn't mean he'll be collecting welfare benefits for the rest of his life.

Of course I understand that if credit dries up entirely - if the banks suddenly decide to cap credit card limits suddenly cap at their current balances - that would have enormously destructive economic input on everyone. But is that really likely to happen? Is the whole of NYC real estate going to be a 'fire sale' - what percentage of total buyers of NYC (remember, there are 5 boros out there) real estate were/are i-bankers or people who were so intricately related to them that the collapse of their bank means the end of employment opportunities for them? All I'm trying to understand is why it is that everyone seems to be predicting such massive doom and gloom. Trickle-down effect to some degree, yes. But unless companies stop providing the services (i.e. credit) that they have for generations (is this a valid concern?) then why should this be anything more than a correction, rather than an entire meltdown, on a macro-scale?

Ouch. If you are right Special K then that is going to really accelerate some peoples need to sell.
It's sort of like when Princess Leia gets that cold shudder when she senses her home planet has been vaporized. What a terrible situation for people.

Someonewhoknows- A 40-50% drop in real estate prices in my book is just a correction.
One that is long overdue. Most sellers who bought years ago will still make a handsome profit
assuming they didn't borrow against their home equity. Oh whats that, they did. Yeah in retrospect
perhaps meltdown will be the preferred term versus correction.

re: SomeoneWK: "Of course I understand that if credit dries up entirely - if the banks suddenly decide to cap credit card limits suddenly cap at their current balances - that would have enormously destructive economic input on everyone. But is that really likely to happen?"

I hope it's unlikely to happen. My point is merely that THAT'S the big deal about what happened to Lehman and Merrill. When these deals happen (or don't, in Lehman's case), the surviving institutions still shrink their balance sheets. That means they say to themselves "we make fewer loans," and we issue fewer credit cards.

We are on a trajectory where consumer credit gets tighter and tighter - - not likely to the point when everyone's cards get shut off overnight. But realize that the phenomenon of taking cash advances off credit cards is also relatively new, and that's the first thing likely to be shut down if things get worse. Many, many people survive (and finance) tight times (like a layoff) through credit cards. Remove or limit that option, and the economy, including Main Street, screeches down to the point where people are buying only necessities.

-> That's <- my answer to, "hey, why doesn't the Lehman failure just a few rich guys falling on hard times?" If institutional and corporate credit don't loosen up, consumer credit will also tighten.

One bright spot: The Fannie/Freddie rescue has finally brought mortgage rates back down. If that trend can hang in there, it's a hopeful sign. But whether it's enough to stop a possible drought of unsecured credit is still not clear.

Someonewhoknows- your comments make your handle seem more and more ironic.
Although I did appreciate you illumination of the mysterious Abraham Meisner.

Your comment: "many of whom could probably find employment in the thousands of
job listings posted in page after page of the New York Times every day"

What happens when those thousands become hundreds. When dentists and accountants and real estate brokers and analysts and copywriters have to take jobs like janitor and seamstress and taxi driver and housepainter to survive that's called a Depression.

On the topic of "the surviving banks take less risk (possibly shrinking credit)" - from the BAC/Merrill conf call:

John Thain, Merrill Lynch & Co., Inc. - Chairman and CEO

Yes, let me just add. As you know, we have been consistently reducing the risky assets on our balance sheet. The biggest single transaction was the sale of the 30 billion notional amount of CDOs. But subsequent to the end of the second quarter and subsequent to that sale, we have continued to sell risky assets, and so you will see when we report our third-quarter balance sheet, you will see a further reduction in those risky assets, most of which has already been completed.

* * *

You see, unless some other banks out there are persuaded to INCREASE the risk on their balance sheet to offset Merrill's (and probably now Bank of America's) pulling back, you simply have less money out there to lend, in the aggregate. The impact of that still has to filter through the economy.

Remember when Bank of America jacked up rates for millions of people on their credit cards? That chill was partly offset by the economic stimulus package. If the Banks continue to get seriously scared, actions like that could be only the beginning. The worry is that credit managers at all the big banks are sitting down, right now this morning, and mapping out what austerity measures they're going to take for the rest of the year.

KGG -

I've made no bones about the fact that I have zero understanding of economics. Rather than tease, enlightening me would be far more conducive to an intelligent conversation.

Are you/anyone seriously concerned that DENTISTS - people with a vital, serviceable skill - will find themselves squeezed out of jobs because of the credit crisis? Isn't that a profession immune from the effects economic ups and downs?

And all I'm trying to do is get a grasp of the extent of the carnage expected. If Wall Street employs 6% of the workforce, and even 20% of those people lose their jobs, you're still talking about a relatively small group of people who are going to go from employment to unemployment. I would assume (though perhaps incorrectly - again, I have zero understanding of economics) that existing employment opportunities would satisfy the needs of some. Others, like the legions of investment bankers who will suddenly be fired, primarily consist of 20 - 30 somethings who are highly ambitious and well educated (they wouldn't have gotten into i-banking in the first place if they weren't.) I would have to assume that the vast majority of those people will not sit around on their derrieres lamenting the good old days and collecting welfare checks until they die. They are young enough and ambitious enough to find or even create employment, even if it's in a field that is totally independent from i-banking, if that industry is set to evaporate or severely contract before our very eyes. Blue collar workers who support those jobs will obviously take a hit, but some of them will be absorbed in the rest of the economy, and those who can't find employment constitute a sizable but relatively small minority of the workforce. So where is the disaster on a macro scale?

Please understand, I'm not deriding the impact of this on those directly related, nor can I make any predictions with even the slightest degree of certainty, given my complete lack of understanding on the subject. I'm just trying to understand the reasoning behind all the pundits being absolutely, positively certain that the downfall of certain venerable financial institutions will be absolutely CATASTROPHIC for the economy as a whole. I don't get it, but I assume I'm missing something, and would like to. Severe pain for those directly involved, yes, and a trickle-down negative effect for the rest of us, sure. But a 'fire sale' of NYC real estate? The end of credit? The onset of a nationwide depression? WHY?

Another angle on what I'm saying - with too much uncertainty, the financial system just shrinks itself, and economic activity just stalls out:

http://www.economist.com/finance/displaystory.cfm?story_id=12231236

"With these developments the crisis is entering a new and extremely dangerous phase. If Lehman's assets are dumped in a liquidation, prices of like assets on other firms' books will also have to be marked down, eroding their capital bases. The government's refusal to help with a bail-out of Lehman will strip many firms of the benefit of being thought too big to fail, raising their borrowing costs. Lehman’s demise highlights the industry’s inability, or unwillingness, to rescue the sick, even when the consequences of inaction are potentially dire."

SomeonewhoKnows- If you chop down the tree at the trunk the apples will rot on the ground.

"Are you/anyone seriously concerned that DENTISTS - people with a vital, serviceable skill - will find themselves squeezed out of jobs because of the credit crisis? Isn't that a profession immune from the effects economic ups and downs?"

With 15,000-50,000 jobs gone in NYC, that equates to 40,000 - 100,000 (including spouses,children, domestic partner, etc) less patients in NYC

SomeonewhoKnows - re dentists - my dental hygienist says that dental hygienists are feeling the squeeze very much. She works for a high-end dentist whose practice is not affected, and even in his office (higher priced everything) the people cleaning teeth are sweating. I know someone very well (hint, hint) who cannot afford essential dental work until an insurance plan kicks in a month from now. A year ago that someone (hint, hint) would not have bat an eye and would have paid whatever price asked for, whether with cash or credit.

Let's say there are 1000 dentists in NYC. This means 40-100 less patients per office. Typical private dental office has 1000-3000 patients. So I would say 5-10% decrease in revunue.

"If Wall Street employs 6% of the workforce, and even 20% of those people lose their jobs, you're still talking about a relatively small group of people who are going to go from employment to unemployment."

But Wall Street is 25-35% of NYC pay. If 20% of those people lose thir jobs, and the rest have bonuses reduced by even a third, that alone is a 12% increase in income in this town. And this isn't a crazy projection, it is likely more.

But then what about the rest of the city? The lawyers... guess where their money comes from. Law firms are already laying off. And lawyers represent a huge chunk of city income.

Then real estate brokers. Then tie guys. Then the car service guys (multiple banks already cut back on this perk. The firms that are gone will cut back 100%). House cleaners. Jewelery.

Of course, then you have public employees. But Wall Street was paying a huge chunk of their salaries. With city income down (and even more down from RE transaction receipts), there will be cutbacks there, too.

Oh yeah, and that dentist... when there are fewer folks in Manhattan to use his service, and fewer with insurance, you don't think his income will suffer? Noone has ever postponed a dentist appointment? And his 401k and savings just decline 20%. Think he's going to buy the former wall streeter's apartment?

Overall, you're probably talking about 50% of the city's income directly tied to wall street. And much of the rest indirectly tied, or at least influenced by.

And you think a bunch of smart 20 somethings with no experience other than Wall Street can't sit around for a few years without finding employment.

WOW, did people completely forget the 80s.

It has already started...

>> Midtown businesses already feel Lehman’s pain
Delis, steakhouses and shirt-makers report cancellations and slowing sales.
http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20080915/FREE/809159960/1123/newsletter11

I guess a lot of folks just don't get (or remember) what a real Wall Street crisis is like in NYC. For those who don't, understand that stories like this are just the beginning.

"I guess a lot of folks just don't get (or remember) what a real Wall Street crisis is like in NYC. For those who don't, understand that stories like this are just the beginning."

exactly..

someoneWK - you evidently own a ton of real estate in nyc so here's another perspective on why the recent happenings will cause prices to crater. In Manhattan, about 2,300 apartments sold in 2Q, which is typically the peak quarter for sales volume. Let's roughly say this translates to about 9,000 units sold annually. Of those, about 30% were foreign sales. We all know how the dollar has strengthened and how foreign markets (both housing and stock) have been hit hard as well. European stock mkts, for example, are down about 30% YTD. So that is clearly going to dry up. Another 30% or so are people buying from the finance industry. So what do you think is going to happen, when tens of thousands of additional layoffs occur? What about the massive loss of wealth of those who still have jobs, but have had their net worths decimated by falling stock prices (of deferred comp)? Even those who managed to avoid both of those are still not going to have a lot of confidence to buy and likely their stock portfolios have taken a hit this year and their expected comp is going to be way down also.

The important thing to remember here is that a very small portion of the total housing stock dictates "market price" for the entire city. In my example, about 9k units will sell in Manhattan. let's say that's closer to 20-25k for the entire city. In 2006, the total housing stock for nyc was about 3.3million!

http://www.nyc.gov/html/hpd/html/pr/vacancy.shtml

So less than 1% of the housing stock is dictating price annually. You can see how such a thin market is highly susceptible to increases in inventory and decreases in demand (harder financing, wall street suffering, etc). so while you may think the cumulative 80,000+ jobs that will be lost across finance are not that big of a deal relative to 8 million population, its a disproportionate impact on housing reference price. and what do you think happens when these layoffs result in more housing inventory as they can't find replacement jobs and have to move out of the city? prices go down, more people capitulate and its a very rapid vicious cycle.

Good point. Prices are set on the margin and the marginal buyers just disappeared. I think we'll see conditions resembling a "buyers strike" emerge fairly soon (more so than already).

I think its pretty clear we're in for some damage. The question is how far will they fall, and how long until people start buying again...

More on consumer credit difficulties. Judging from the volume of articles, people are starting to wake up to this effect of the investment bank failures:

http://finance.yahoo.com/tech-ticker/article/57141/Your-Loan-Denied-Main-Street-Fallout-of-Wall-Street-Crisis?tickers=MER,BAC,LEH,%5EDJI,%5EGSPC,XLF,SPY

Also note that HP announced it is cutting 25,000 jobs today. This isn't just Wall Street.

http://online.wsj.com/article/SB122151212200638441.html?mod=hpp_us_whats_news

"we might look back at 2007 prices and realize everything
on the market was DOUBLE it's sustainable value."

With $1,000,000 one-brm apartments, I think you're right.

BTW, I do remember the '80s very well. This has some
of that flavor, but already feels like it will be more far-
reaching.

I was walking by the Lehman building today and the reality hit me. Talking about down 20% or up 30% on this forum is one thing. Seeing thousands walk out dazed is another - when it's clear they all realize that jobs will be tough to find for a couple of years. For those not so junior, half your savings are stocks that vanished. Most dont make a killing as we all think. I have some banker friends - most are nice, ambitious, hard working people. Yes some make a ton of dough and some at the top (or not at the top) are obnoxious but this is just sad. Seeing so many of them.... And you know what, let me start a debate - why should A-Rod or Britney Spears or any other "star" be so rich but not hard working college graduates. Its simple - highly specialized skills get you paid well, and its only because thousands more cannot or did not make it there. So lets stop venting at those who did better than us. Lets try to figure out which of our skills we can get better at. But the fact is I saw so many heartbroken people there that the human element today biased me towards not hating ALL bankers but SOME bankers.

Talking about economic impact. Econ101 for those who need it. Multiplier effect. Bankers this year will buy $1MM less of suits and ties. The shops that sell these will shut a couple of stores or employ lesser people. These people will spend $200k less on dining out. The restaurant owner will spend less on clothes.
http://en.wikipedia.org/wiki/Multiplier_effect
For govt spending, its almost 2. So every dollar lost on wall street this week is another dollar for the state economy assuming the consumption multiplier is close to the govt spending multiplier.

Expect our city to be in pain for many months possibly a couple of years. A financial institutional model that overstretched is broken. It will take us years to build it back while London and HK and Tokyo try to snap up some of the business as they already have. We'll all pay for someone else's greed and someone else's negligence. On a positive note, we'll make our city more affordable.

Away from computer all day, and just want to make one quick point. SHK doesn't feel bad for 30-year old ibankers that used to make $5MM, and now make $2MM. Um, the vast majority of 30-year old ibankers don't make anywhere near that much. Maybe they make $200-$500K, depending on their groups, quickness of career path, luck, etc. That is still good money, but... the "typical" 30-year old investment banker has worked 80-100 hour weeks for 6-8 years, put up with all sorts of crap from his/her bosses, sacrificed health, family, friends, fun, etc. for a shot of getting to the top. Plus, he/she probably has MBA loans, pays super high taxes (since they don't employ Petrfitz's accountant), overspends on clothes, housing, etc., cause they don't know any better. And now, that person is out of a job, probably with not a ton of savings and dismal job prospects.

To be clear, I am not suggesting we start charity organizations to help these folks buy their hickey freeman suits and bottle service at NYC clubs. But this is still a sad day, these are still sad stories, and these people are experiencing very real pain.

The good news is that a generation of high school and college students might choose to do something creative or generous with their lives as opposed to spending their days gambling with house money and fleecing the naive in their relentless and conspicuous pursuit of easy wealth.

newbuyer99, I agree - someone on this forum unloaded some scorn on ibankers as a group and contrasted them directly with himself who, he says, has worked his way up from the lower middle-class. I wonder if it ever occurred to anyone that Wharton may have some lower middle-class whiz kids who have tried to use their brains and hard work to work themselves into a profession that MIGHT pay off big, and that in the first 10 years of their career they might have huge student loans to pay off, at the same time that they are expected to come to work at 7:00 am in a three-piece suit 6 days a week and do grunt work for grueling road shows. What does it profit anyone to gloat over someone else's misfortune???

Controller Thompson just said on NY1 that the estimate is that for every Wall Street job in NYC, there are 1.3 to 1.5 jobs supporting it...

So, figure 30k layoffs (which I think we hit already) means 70-75k jobs lost...

I don't mean to gloat over anyone's misfortune, and if that's the way it reads, I apologize. I was merely trying to underscore the irony in some people's evincing great sympathy for the i-bankers - virtually all of whom are highly intelligent, highly educated, and likely very resilient young people - who have lost their jobs. I would guess that while this week's events are life-altering for them, many will find a way to rebound (consider what happened to the tens of thousands of smart, young, able dot-commers after 2001) Contrast that with people who were REALLY devastated by events like Katrina, Enron's wiping out of people's retirement funds, etc. Had there been an outpouring of sympathy/charitable donations from employees of Lehman, Merill, et al. after those real disasters, I would be inclined to feel far more sympathetic to the group as a whole. But in all likelihood, most spent the immediate aftermath of those catastrophes buying more suits and drinking at more clubs. The whole culture of me me me money money money that pervades Wall Street is rather sickening. And while I don't celebrate anyone's job-loss pain, there is something of a delicious irony in knowing that people who control so much wealth and are accustomed to living in a way that makes them feel superior to everyone else suddenly come crashing down to such an extent that they finally share the worries, concerns, and fears of the rest of the world.

"Had there been an outpouring of sympathy/charitable donations from employees of Lehman, Merill, et al. after those real disasters, I would be inclined to feel far more sympathetic to the group as a whole."

There was. Tons of charitable organizations collecting a lot of money for Katrina, tsunami, etc. Who do you think they were collecting the donations from?

"The whole culture of me me me money money money that pervades Wall Street is rather sickening."

Something else sickens me more than that. It's the fact that certain professions' rate of pay has outpaced inflation by orders of magnitude, while most people's incomes have gone backwards. Then we have people calling for minimum wage for State employees, lowering public school teachers' wages, smug comments such as that there's plenty of affordable housing for working class people out in places like Bensonhurst (has anyone checked the rents there lately?), and why can't NYC get its act together and kick out all those thugs living in the projects and ship 'em over The Bronx.

Some of the worst advice given out in 2008 was this summer or September or October or at the time of Obama's election after some big declines through that point was to not panic and not to sell. Those who did would have been better off.

Case in point of the poor advice:

stevejhx
about 3 months ago
ignore this person
report abuse BTW the Fast Money traders just agreed with me - there has been no fundamental change anywhere. What's driving this is fear. Don't jump in now, just don't exit with a loss if you don't need to.