Tueday 9.16.08

Yup.

Yesterday I was feeling pretty good until the last hour of trading. What few positions I have are gone today. Bailing on real estate on Friday.

Cash is king.

I changed my mind again. dco is right. We will see Down 9,000 before we see Down 11,000.

9/16/08 will go down in history as...........

"Be fearful when others are greedy and be greedy when others are fearful."

- Warren Buffet

People are not fearful yet. We still see asking prices north of $1000/sf

Slee "People are not fearful yet. We still see asking prices north of $1000/sf"

Line of the Day.

funny, I almost posted how unsophisticated that statement was.

ccdevi and dco - you both are quick to pick apart other posters, as well as, quick to support the crashing of the economy but you both support the policies and administration who got us here.

Sorry if we are unsophisticated in actually trying to hold those responsible who should not have caused this disaster.

Sorry that you consider us unsophisticated since we dont subscribe to your theories that the administration had nothing to do with this disaster and could not have done anything to mitigate it.

"People are not fearful yet. We still see asking prices north of $1000/sf"

Exactly. And let it be known that Warren has made his share of bad investments, as well - the future is unpredictable.

Nothing wrong with repositioning a portfolio among assets, if what you were doing before isn't working and you think it's right to do something else.

Otherwise, you wind up like LEH.

$800 psf in prime Manhattan, a 50% decline.

what in the world are you talking about? What does this thread have to do with anything you just mentioned? Are you stoned?

that was for petrfitz

ccdevi - is is not true that you called him "unsophisticated?" is it not true that you were questioning his position that RE may not be crashing?

Is it not true that you have repeatedly posted that the Bush Adminstration and the republicans had nothing to do with this credit crisis?

"Be fearful when others are greedy and be greedy when others are fearful."

Meaning its time to buy stock now.

And that isn't just a Buffett thing, its pretty standard for the long-term greats... Bogle, Swensen, etc.

RE, we're nowhere near panic setting in.

Just for clarity, my point was that by the end of today there will be value buys in the stock market. The comment was not angled at the RE market.

"is is not true that you called him "unsophisticated?""

I called the statement "people are not fearful yet. We still see asking prices north of $1000/sf" unsophisticated.

"Is it not true that you were questioning his position that RE may not be crashing?"

No its not true, not to mention that what you wrote had nothing to do with that.

"Is it not true that you have repeatedly posted that the Bush Adminstration and the republicans had nothing to do with this credit crisis?"

No thats not true, but of course this begs me to repeat my question, what does this have to do with this thread?

Again, are you stoned?

ccdevi it is so unsophisticated to back pedal from your previous posts. Are you stoned?

please let me know what posts I'm backpedaling from, thanks. and again I'll ask you to please explain how even if what you allege is true, what in the hell it has to do with this thread.

petr is a PROFESSIONAL provocateur.

malraux - couldn't agree more with buffett quote. there has to be some relief rallies here and actually, market is now up (intraday). but i'm thinking i'm selling down on any real strength... but soon, could be some great buys in the stock mkt

petrfitz- Show me where I have mentioned the support of the Bush Adm. I could careless, about the politics, lets talk about solutions. This was gerrd and many people should be in jail. I could care less, if they are Republican or Democrat.

ccdevi - you do not remember defending the Bush administration by blaming the people for being stupid and not being able to read the legalese of the mortgage apps?

Stakan - still waiting for you to add any value to any post. Just another attack. Do you have anything of value to offer?

hey Kgg, knockout punch is a wild miss countered with a nice straight to the face....

nyc,dco,kgg..i despise people like you guys hoping for the demise of others so you can gain. I desperately want people to keep their jobs(see I'm a good human)...you guys want people to lose their jobs(your a bad human)......you can't deny you want AIG to go under.... you want people to lose their jobs at AIG...how do you upside down screw ups live with yourselves?

"you do not remember defending the Bush administration by blaming the people for being stupid and not being able to read the legalese of the mortgage apps?"

I posted that banks gave loans to people who couldn't afford them and that the banks were stupid for doing it and the people were stupid for taking them. Thats almost word for word. If that means to you that I "repeatedly posted that the Bush Adminstration and the republicans had nothing to do with this credit crisis," then you are as stupid as everyone on the board seems to think.

But regardless lets assume for the moment that I believe that the Bush Adminstration and the republicans had nothing to do with this credit crisis. AGAIN, WHAT THE HECK DOES THAT HAVE TO DO WITH THIS THREAD AND SPECIFICALLY WHAT DOES IT HAVE TO DO WITH MY ORIGINAL COMMENT ABOUT THE SOPHISTICATION OF THE STATEMENT "People are not fearful yet. We still see asking prices north of $1000/sf"

What is wrong with you?

I don't believe that steveF and petrfitz are as dumb as their comments.

I'm pretty comfortable that they know their claims are wrong, they just like arguing and getting others riled up. Don't go after the bait...

steveF: I haven't seen anyone call for "the demise of others." The bearish case calls for a return to a more historically-normal relationship between incomes and the cost of residential property. Even without a single lost job, a return to equilibrium might have entailed a 10-20% decline, because the market had simply overshot to the upside (the definition of a bubble). Add the disappearance of bonus money, a sudden constriction of credit, and the negative wealth effect of a declining stock market, and the drop to reach equilibrium might be 30-35% - still, without any loss of jobs.

The awful situation hitting many Wall Street families might be the trigger for a sharp drop, and it will doubtless compound the price declines as distressed owners are forced to sell; but job loss/insecurity isn't the main reason for the decline. The fundamental overvaluation has been in place in many neighborhoods for at least two years. Some degree of correction was necessary. I think we all wish it could have happened a different way.

West..1st thing....I disagree with your overvaluation theory.
2nd.....nyc, kgg, dco and stevejhx are foaming at the mouth at the thought of job losses...those are the people i can't stand...I've read your posts and they are much more reasonable...you aren't looking to punch out the old guy and grab his wallet like these guys.

British bank Barclays is near a deal to buy Lehman Brothers' core U.S. broker-dealer business, including equity, fixed income, M&A advisory and other parts, a person familiar with the matter said.

A deal could save thousands of jobs and many of Lehman's core investment bank operations, a day after the U.S. bank's holding company filed for bankruptcy protection.

Thank God for the above right dco, kgg, nyc and stevejhx?

http://dealbook.blogs.nytimes.com/2008/09/16/industry-efforts-to-rescue-of-aig-said-to-falter/index.html?hp

AIG could declare bankruptcy as early as Wed???

steveF: The overvaluation theory isn't mine, particularly. I think it has some merit. I also think it tends to get stated here in overly absolute terms, as do certain counterarguments.

Again, I think the schadenfreude is much less pronounced than you think. Nearly everyone got a kick out of seeing James Cayne laid low, and I guess long-time bears are enjoying a bit of personal vindication after years of being dismissed as crackpot cassandras. That's just human nature, and it's a long way from being happy about the guy in the Bear mailroom losing his job and his savings.

"...AIG could declare bankruptcy as early as Wed???..."

No big secret - I thought/assumed it was happening today! Maybe they're waiting for just after the close to make the announcement for obvious reasons....

A Barclay's deal would definitely save lots of jobs, as would a deal for Lehman's asset management business. So I hope that happens even though I am still bearish on nyc real estate. But there will still be lots of layoffs even with a sale. In fact, I don't think many thought all 24k of Lehman's employees would be roaming the streets this week.

steveF- You should do some historical research, on this site. You have no idea, what you are talking about. Over the last year, I was called many names and laughed at on a daily basis. I have been posting for almost a year, about serious problems this economy was facing.

At no time did I laugh or gloat, at misfortunes of others. My sole purpose, for posting, was to share ideas about RE and markets. I will not apologize to you or anyone else for posting my analysis. Perhaps, if some would have spent time actually reading the context, they may have made a better financial decision. I have benefited ZERO from my postings. I find your opinion to be insulting and without merit.

If you do your research correctly, you might find out, that my spouse's job, is directly connected to wall street. So before you go and start shooting your mouth off, perhaps you should know what you are talking about.

West81....after all their responses to me I know now that their silence means I've struck a nerve and that's great.....I understand your arguments about income levels and such...but out of say 10 people/couples I know who own studios and 1 bedrooms, most are older people in their 40s and 50s and 60s who have no mortgage. they are wealthy, live full time elswhere but they just like the prestige of owning in manhattan. This is something that I've come to notice and it's too much of a coincidence that all these people have no mortgage..so it must be more common than we think.

and they love to tell you how they have no mortgage..it seems to ALWAYS come up.

SteveF: Those aren't the people who are selling. They have no reason to. On the other hand, when they DO decide to sell, there's no real floor under the price, because there's no debt to repay. If quality of life in the city declines sharply, pied-a-terres will be dumped at fire-sale prices because there's no reason to keep them.

Not saying that will happen. I just don't know what your point is here. Your pied-a-terre friends had a big paper gain. That gain may get wiped out, or it may not. Either way, the people you're citing as a market bulwark won't influence the outcome much.

"A deal could save thousands of jobs and many of Lehman's core investment bank operations, a day after the U.S. bank's holding company filed for bankruptcy protection. Thank God for the above right"

Yes, thank God. The more jobs saved the better. I think some Schadenfreude is out there, and it's a bitter, vindictive sort. It's also short-sighted. What's bad for one of us is bad for all of us.

dco..whatever guy..you can spew it better than any politician...but you didn't answer my question from above....

British bank Barclays is near a deal to buy Lehman Brothers' core U.S. broker-dealer business, including equity, fixed income, M&A advisory and other parts, a person familiar with the matter said.

A deal could save thousands of jobs and many of Lehman's core investment bank operations, a day after the U.S. bank's holding company filed for bankruptcy protection.

Thank God for the above right dco, kgg, nyc and stevejhx?.......right dco? thank God jobs will not be lost and you hope and pray that all jobs can be saved right?.... no one should suffer right dco??.... the market will heal itself right dco??......not...admit your hoping for the worst...pathetic piece of....

From NYT
"Barclays will buy Lehman Brothers’s core broker-dealer unit, picking up the heart of the failed investment bank’s operations as the 158-year-old firm slowly unwinds, people briefed on the matter said.

A price could not be learned."

"Thank God for the above right dco, kgg, nyc and stevejhx?.......right dco? thank God jobs will not be lost and you hope and pray that all jobs can be saved right?.... no one should suffer right dco??.... the market will heal itself right dco??......not...admit your hoping for the worst...pathetic piece of...."

Someone is getting awfully emotional
-Broker?
-Laid off from Lehman?
-Developer shitting your pants?

"I changed my mind again. dco is right. We will see Down 9,000 before we see Down 11,000."

did you change you mind again after you changed your mind again?

is the same crystal ball you used to predict this guiding your -50% drop in manhattan statement?

thanks for the laugh sir

Here is how I sum up the bulls to bears conversation over the past year...

"You're wrong and you're stupid"
"You're wrong and you're stupid"
"You're wrong and you're stupid"
"You're wrong and you're stupid"
"Ok, you are right, but you are being mean"

Obviously, folks are going to be a little sensitive... but dco never gloated. Don't punish the messenger.

steveF "Thank God for the above right dco, kgg, nyc and stevejhx?.......right dco? thank God jobs will not be lost and you hope and pray that all jobs can be saved right?.... no one should suffer right dco??.... the market will heal itself right dco??......not...admit your hoping for the worst...pathetic piece of...."

I'm sorry you have so much pent up hostility, may I suggest you seek anger management.

Everyone should take a breath and see how this all plays out in the next week or two. The fate of AIG will be most telling. If it survives, whether through another government bailout or not, the downturn may not be as severe as some are predicting here. Merrill made a good deal for itself with BofA. There will be job losses there but they won't affect the NYC area as badly as if Merrill went under. If Barclays takes on Lehman's trading, underwriting and M&A business, job losses there will be reduced too. I don't think Lehman, Bear, AIG or Merrill employees were driving NYC real estate this year, and everyone knew those firms were in bad shape. If AIG goes down, that could ripple very badly into the whole market, but if it holds up we may get through the next year with some damage but not a total crash.

dco is hoping for a real estate crash, but I don't think job losses make him happy. He's a natural pessimist, but he's not mean-spirited. He probably wouldn't mind incomes getting cut and real estate prices to drop, but I've never seen him seem happy about people losing jobs.

nyc10022, actually your summation would work both ways. I still don't get how a select few here get so caught up about this mythical bear-vs-bull, who's-in-which-camp, told-you-so harangues, and so forth. Granted, a lot more of this goes on at Curbed, but it happens here more than I would hope.

The Barclay's purchase is more good bad news. Barclay's isn't taking any of the derivatives units. Which is exactly the units that have grown the most over the past 10 years in terms of headcount. Derivatives is a technology intensive business that employes literally dozens of people per salesperson/trader (quants, back office, middle office, IT, etc...). In contrast, an investment banker doesn't need nearly the same amount of support staff. The whole "9,000 jobs saved" is just to avoid panic and possibly sabotage. The real job loss is going to be hideous.

-----From the WSJ article----
"Barclays won't be buying any of Lehman's real estate, real-estate-backed securities, derivatives positions or over-the-counter trades. Lehman's European business will remain in bankruptcy proceedings. Lehman also is in separate talks to sell its investment-management unit to private-equity bidders."

http://online.wsj.com/article/SB122156586985742907.html

"nyc10022, actually your summation would work both ways. I still don't get how a select few here get so caught up about this mythical bear-vs-bull, who's-in-which-camp, told-you-so harangues, and so forth. Granted, a lot more of this goes on at Curbed, but it happens here more than I would hope."

I agree that it works both ways, as there are idiots on both sides, but IMNO dco is unfairly taking heat here. He made predictions months ago, has basically been shown to be right (or more right than 99% of other predictions on this board), hasn't gloated, but is now getting insults.

As for the market itself, July/August average was down 6-7% by mean and median. Given that was before the more recent stuff, saying "its not as bad as some are predicting" to me still means we have some ways to go. Clearly this week's news will have a significant impact. Even if "contained", I think we're at minimum talking a decline of that size again.. giving us double digits. The number is debatable, but the layoffs number now is absolutely bigger than last week's. Agreed that Wall Street wasn't propping the market recently, but that to me is also why it fell... add in some fear, and I think we have a major downwind.

We'll see how this shakes out, but I think its pretty clear we're a breath away from double digit Manhattan declines.

Morgan Stanley just reported and they appear to have beaten estimates. I agree with LICC - all eyes on AIG. If that ship goes down, you've got a titanic of derivative counterparty exposure. Not to mention the crazy anxiety policy holders, etc will have as they all seek unwind what insurance policies/annuities, etc. they have.

"I don't think Lehman, Bear, AIG or Merrill employees were driving NYC real estate this year"

Not so sure that is true. Remember, many of these people bought new construction in the past which may have only closed this year. Case in point - Jimmy Cayne buying at the Plaza. I know he's not representative. I have friends at banks who signed on to buy new construction 18 months ago and they just closed last month.

silly, silly bulls...why can't you comprehend that the bubble has burst and is not coming back anytime soon.

lets imagine that Barclays only fires 1,000 people...what do you think is going to happen...now that their jobs are save they are going to go back to previous habits and buy million dollar condos...are you kidding me?

first of all the profits driving wall street was in the mortgage bond business...packaging, securitizing and selling...that business is DEAD. it is not coming back...there are no profits with which to purchase or maintain real estate

next...anyone lucky enough to get a bonus will be putting in in their mattress...period end of discussion. psycology has changed dramatically

finally...the evaporation of Lehman and acquisition of Merrill has made billons of capital disappear overnight. Banks are not giving out money for jumbos. The only mortgages getting done is thru fannie mae, HSA and freddie mac...prices have nowhere to go but down and go down significantly

Lehman is apparently now telling the college kids and MBAs that had offers "sorry"... saw it in my college newspaper.

I agree with flmd. Say its "only" another 5k layoffs. First off, that is still5k layoffs. Second, as flmd said, folks still need mortgages, and those aren't any easier. And, most importantly, we now have the fear. That was the missing element from a RE crash. The declines are already in, and now with the front page stories scaring the bajesus out of everyone, its going to be a tough market for a while...

"mortgage bond business...packaging, securitizing and selling...that business is DEAD."

point of fact. not dead, frozen. once mark to market rules are relaxed....and they will be, mbs market will un freeze and cdo's will pick up, huge deals to be had in those instruments. CP market has already been showing signs of life,,

moreover, barclays was waiting for lehman to go belly before stepping in. rates are low, will get lower....

bottom line. this ain't pretty but this is not armageddon.

now i'm off to hear Streisand for Obama for $29,000 a head.

you're kidding right...those bonds are worthless...if companies keep waiting to mark these things down hoping they come back in price we will look just like Japan in the 90s.

By the way that was the Lehman, Bear Stearns and AIG strategy...its worked out well. The only reason Merrill is still alive is that they sold off a big piece of their junk...granted it was only for 22cents.

if the mark to market rule is delayed you can guarntee we will turn into Japan...no one will give these comapnies a dime until they write down big chunks of losses

I do think it's important to poit out that RE in NYC is not the driver of the economy, rather the economy is the driver of RE in NYC. If AIG can survive, we will have a MUCH better shot at containing the damage that has been and will be done. If AIG goes under and 116,000 are out of work on Wednesday morning, than the game will be significantly different. The pain will be greater and the bottmo pushed further out. Wamu will likely find a suitor if they need to. Wachovia...not so sure. AIG will be the story of Wednesday. They will either finally stand and help contain the damage and let us know we are one step closer to the bottom or they will fall and all bets are off....

generalities aside, the bonds are only worthless because there's no market currently. they are not inherently worthless (other than the defaulted pieces and even there not "worthless"). there's a large amount of performing asset backed paper out there. Once the market is created, the inherent value will become more apparent.

thus, no, i am not kidding.

Barclay's won't touch Lehman's assets. They only want the people. Which is why the value is only $2BB. HR usually assumes $250K per person average all-in cost per employee (salary, benefits, computer, phone, floor space): 8,000 people * $250K = $2BB.

I said this a while back and I'll say it again. Lehman's portfolio has negative expected value. That is why they declared bankruptcy.

When you step back and look at where we've gotten so quickly, some of the logic has gotten a bit amusing. I'm paraphrasing, but I think you get what I mean. Imagine someone had said this a year ago..

"Yeah, Bear will go bust, Lehman will go bust, Merrill will be in a fire sale, AIG, Fannie, Freddie will go into government conservatorship.... but the market will be fine, because the layoffs will be 21k not 23k and because Goldman and Morgan profit are down, just less than we expected".

don't forget that in japan, they were loathe to lower rates for the longest time and culturally they refused to foreclose on collateral, all against US advisement. this is not fun but oil has plummeted, other sectors are doing fine. we have a dynamic economy and this is just a case of us watching a train wreck. its collective rubbernecking.

folks get shaken out of other industries all the time. if you have a 2 year horizon, yes, not pretty but if you don't we'll all look back on this in a few years.......and plow into a parked car.

"...Here comes the knock-out punch...."

Dow 11,060.

Well, not q-u-i-t-e y-e-t.

totallyanonymous, what are you talking about? Japan's interest rates were 0.5%, half a percent, in the late 90's. There was a time when the forward interest rate was in danger of going negative. Which would mean you pay the bank to hold your money. That the Fed didn't lower interest rates today is a godsend.

As for NYC real estate, people will start leaving in droves. Not because of crime but because they can't afford to stay. It's one thing to make $125K and spend it all on rent and lifestyle hoping to make $1,000,000 one day. But that game is over. All those kids who used to move here with stars in their eyes are going to have to work their way up the ladder through the branch offices in Topeka, Cincinnati and Chicago to finally reach NYC.

For those of you who may not know this, derivatives trading started in Chicago in the 80's not NYC. The CBOT and the CBOE. If you think NYC has to be the center of finance you are wrong. I don't know where Prometheus' fire will flash next but don not assume it will be in Manhattan. These Wall Street power players are gone for a long, long time. Get ready for commercial bank corporate culture. Home in the suburbs. In by 8 out by 6.

In the LATE 90s, guy, not in the early 90s, which again, was too late. The Fed dropped rates immediately in this crisis.

all we have here is consolidation in the ibanking industry. yes it hurts nyc economy. overall, US economy is not in terrible shape, particularly considering the shape of the financial industry.

Dow 11,060.

25% decline off a peak that wasn't so high... pretty f*ing huge in my book...

When are condo prices going to drop so that I can buy something for my family?

I am still waiting, all I see is softness but no real drops to make things more affordable. When will that happen?

totallyanonymous, my point is there is no more brass ring in NYC. Wall Street was the thing that so many people aspired to. Lawyers working on deal with Investment bankers would try to jump ship to work the the investment bank. Same with accountants. And IT guys. This is in addition to the standard issue MBA, MS, Ph.D.

And the maybe not so funny thing is that the regulators from the state of federal government would try to get jobs working at banks if they could. And if they were smart, they would get hired so that Wall Street could stay ahead of the Feds. All that is gone now.

You may think my words are bleak but by soon people will pack up and leave and not come back. Take their $200K and buy a place somewhere else and think about what might have been.

If they still have $200K after this week is over

NYC - it's 22% off a high that occurred a year ago and I don't understand how you can say this peak wasn't that high anyway...it's the highest ever.

Also, let's not get ahead of ourselves here and go from predicting 50% price drops in NYC RE to the end of investment banking as we know it. These firms have been through difficult times before and most will not only make it throguh, they will thrive. Not tomorrow or next week, but seriously, if you think all of I-banking is dead and gone then the suburbs are going to be in even worse shape that NYC.

waverly, what are you talking about? Of course it's the end of financial services as we know it. The derivatives market has collapsed. No more huge balance sheets full of impossible to value instruments, off-balance sheet transactions, poor regulatory oversight, printing money, pretending you are carrying a profit when you are holding a loss, etc...

Banking is about to go back to adding machines and general ledgers and passbook savings accounts. The Federal government is running the mortgage market. No, the world is not coming to an end, but then the world never comes to an end, it just changes in ways you don't anticipate.

> NYC - it's 22% off a high that occurred a year ago and I don't understand how you can say this peak
> wasn't that high anyway...it's the highest ever.

Two years ago. And that it was so long ago makes it worse... thats a 30% decline in real terms...

As for it not being that high before, the return rate in the previous years was *absolutely* lower than it was pre the 2001 crash...

> These firms have been through difficult times before and most will not only make it throguh, they
> will thrive.

We kidding with this? "Most" certainly won't make it through because a huge chunk have already failed. Half the bulge bracket is effectively gone... Best case scenario is still MAJOR turmoil.

Not true. I-Banks are clearly greedy and have caused much of this pain, but they know how to make money and they will come around just like they always have. Seriously, adding machines and passbook savings accounts? Come on, let's be real here. Lehman and Bear were big firms, but they were not the entore universe of I-Banks. Will the industry be hurt? Of course....it already has been. Dead? No way. In fact, I would say it is irresponsible to keep repeating such a bogus statement here, becasue some people will actually believe that. Your prediction is nothing but an off-the-cuff remark to try to show you know more than everyone else. My statement has facts and history and, quite a bit of truthiness to it, so let's all take a deep breath and stop calling for the end of all I-Banks. Talk about taking a complicated issue and running off with nothing backing you up.....

Let’s hope AIG finds the money to buy the time to sell assets and get
back on it’s feet because it is the keystone that once removed could
send everything tumbling. If it goes BK the market hits the canvas.

When Drexel evaporated, it was supposed to be the end of the junk bond.
It wasn't the end of the junk bond.
There were talking heads who called for a complete change in finance.
To paraphrase one editorial, it's time to call a high-yield bond what
it really is, an EQUITY.
That didn't happen either, did it?
This is not the first time there has been turmoil about derivatives
and people turning the word "derivative" into a curse-word.

OTOH ....... the landscape of players just changed dramatically.

Investment banking has not gone up in smoke. Stock and bond underwriting, mergers and acquisitions, money management will be fine. Derivatives are dead. Two reasons 1)the Fed has seized mortgages which were the largest market to make derivatives on and 2)half of the players in the game are gone so the game has the shrink by a lot.

So we are back to the 1950's style finance. I'm sure the brilliant minds on Wall Street will find some new way to make billions and put us on the precipice of financial glory or ruin again. I'm just saying don't expect the Phoenix to rise from the ashes. Expect more of a flash of Promethues' fire in some far flung land (derivatives that we use today were started in Chicago at O'Connor capital partners).

The landscape of players has changed dramatically lowery -
Drexel Burnham were just the fallen poster boys for the 80's.

Here is a blurb from 2.14.90:

"Drexel's securities business effectively collapsed yesterday after the parent company defaulted on $100 million in loans and other Wall Street firms sharply curbed their dealings with the investment house."

Compare that to the losses that we are seeing today. It was tabloid news compared to this meltdown.

AIG will be saved. Praise the lord.

kgg, yeah, that was chump change compared to now, wasn't it?

And "expensive Manhattan real estate" on 2.14.90 was chump change
compared to now also. But that was serious stuff, when Drexel
suddenly went out of business and its employees' first knowledge
of it was seeing banners on their Bloomberg screens.

The famous RJR Nabisco deal had something like $22 billion in
financing. I think there's a quote from someone published in
"Barbarians at the Gate," who posed the rhetorical question,
"$22 billion? Is there even that much money in the world?"

The Fed is lending $85 billion to AIG? Inflation, I guess.
Anyone know where I can get a 25-cent cup of coffee?

Bear, Lehman, Fannie, Freddie, all essentially bankrupt, owner's equity wiped out. AIG seems like it will see exactly the same fate. Merrill narrowly missed, and more might be on the way. Thats a LOT more than Drexel, which was actually pushed into bankruptcy by legal action from the government, not the market.

nyc10022
39 minutes ago
ignore this person
report abuse Bear, Lehman, Fannie, Freddie, all essentially bankrupt, owner's equity wiped out. AIG seems like it will see exactly the same fate. Merrill narrowly missed, and more might be on the way. Thats a LOT more than Drexel, which was actually pushed into bankruptcy by legal action from the government, not the market.

so now that we've read your insightful posting nyc10022, what should we do?

Enjoy some time with friends and family...

(not a bodega)Well if I get a cup of cofee at starbucks it's $2.o6, lets call it 2. So it's 8 times as expensive as your pre-inflationary cup it puts Drexels write-down at an adjusted %800,000,000. So even with inflation it's minor compared to writedowns of 18 billion. Although Drexel received unprecedented media coverage making it seem like the swindle of the century it is nowhere near as potentially damaging as this current turn of events. Try Drexel x 100 when you take into account all of the recent failures.

kgg, which Starbuck's is selling you coffee for $2.06 - I always have to pay $2.11 for a medium, or $1.90 for a small. No fair. "Try Drexel x 100" - in fact, this is so huge that it is impossible to wrap one's mind around it. Now, to give young kids a shiver or two - Drexel's demise (there were other firms that went under then, as well) was followed in less than 12 months by massive layoffs at certain law firms, particularly a certain one noted for M&A work for whom Drexel represented such a substantial portion of its billing that staff when filling out their timesheets would routinely just fill in Drexel's client number and the matter "general" for time they could not account for any other way.

I won't suggest people multiply that by 100, because that will lead to being labeled "one of the bears" and full of gloom and doom. Astonishingly, one long-time employee of that law firm I mentioned told me recently that at least they have 'diversified' since they learned their lesson with the Drexel downfall in the bad old days. I think this is a nice barometer of just how deep in denial New Yorkers are. Oh, OUR jobs aren't going to be touched by LEHMAN's downfall. After all, WE are DIVERSIFIED. Along those lines, there's the thinking that big corporate law firms will ride out bad times because they've beefed up their workout and bankruptcy departments, their IP practice, etc. Somehow, I do not think so, kgg.

Do we agree? And thats just a regular grande including tax.

NYC - AIG is quite different than lehman and Bear. The loan has given thwm the time they need to sell off certain assets to pay back the loan, cover their losses and free up cash for going forward. This will prevent them from not only going under, but also having to be forced into selling off subsidiaries for far less than they are worth. AIG has a number of very salable assets and, with the time they now have, will be able to come out of this. It is not accurate all to say that AIG is in exactly the same place as Lehman and Bear, because it is just not true.

Also, the Barclay's deal will save some 8-10,000 jobs at Lehman....not great, but better than nothing. These steps at containment and damage control are important. I am not trying to make it sound like there are no problems, because there are and there will likely be some more pain. But these are important developments in the big picture, even they don't seem like it now.

Adding to waverly's comment, AIG's counterparty exposure is more widespread than Lehman's. As one example, banks yesterday were not lending to each other for fear of too much exposure to AIG, creating a credit crunch. For another example, many businesses and consumers own some type of AIG product. The failure of AIG would have shaken the world markets and the economy in ways we couldn't imagine.

The AIG bailout is about their derivatives exposure. The insurance arm would not fail because insurance is insured (by companies like Buffet's General Re). And in any case insurance would only be in danger of failing if there were some catastrophic event triggering millions of policy claims. The government could have let AIG's capital markets (derivatives) fail and let the insurance company remain open. My guess is that if AIG holdings goes chapter 11 and the broker/dealers go chapter 7 a la Lehman, the confidence loss is what really scares the Fed. Because then you have to explain to millions of policy holders that everything is OK. Imagine Bush on TV telling people not to worry....there would be rioting. Now, there will be taxes, taxes and more taxes. All of these bailouts still have to be approved by congress who will then need to allocate money for them and that money comes from, that's right, it comes from our pockets.

80sMan, you're correct in that the insurance will be fine. But the Fed's loan was structured so that there would be limited exposure to the taxpayers. AIG will have to pay back the loan to the Fed at a hefty price, and the gov't might get more if the stock price goes up. In the meantime, the company will be restructured and units will be sold.

The Fed is fully aware of the 'moral hazard' in this situation, but it needs to restore confidence in the markets. When all is said and done, Congress will need to review our current regulatory structure to avoid the need for these rescue plan fire-drills.

uptowngal, the Treasury just announced a temporary Special Funding Program to issue new T-Bills to deal with the crisis. That is taxpayer money.

And what happens if AIG can't raise $85billion + 8.5% over prime in the next 2 years? The government has turned into loan sharks? Might as well.

The government will make money off the spread - they're already getting LIBOR +8.5 from AIG.

And wouldn't have engaged in the deal if they didn't feel that AIG could somehow come up with the cash. The 2-year time window will allow the company to sell off divisions and arrange for borrowings/fundings to meet this obligation.

I know I sound old (I'm not), but if you were around in the early 90s, this town was as bleak as I've seen it. It happened again post 9/11 and here we are again.

It will come back, but like anything it will get worse before it gets better. New York City is not Cleveland (unless they elect another Dinkins).

kgg, we agree - sort of - I'm not making light of how much bigger this week is than the last meltdown on Wall Street - I do think you're making light of how huge that last one was, by saying that Drexel was small - there was a reorganization of all Wall Street. Does anyone remember Kidder Peabody? Smith Barney? I know that Lehman is much more dire, but.... supposedly very reputable, established firms became departments within larger institution, or just vanished, and there was lots of shuffling of desks, with lots of finance employees losing their place in the musical chairs game. But I do agree, this is much larger.

I think that coffee was more than $0.25 back then also, so you get a point for that.

I think 50% off prime real estate is very foreseeable. Once again, though, it won't happen quickly, and every step of the way there will be lots of reasons to doubt it's really happening. People don't panic sell real estate.

uptowngirl - what country to live in? the government is broke. The ONLY thing holding our entire country together is China willing to loan the US debt. We need to China to float our economy. If they pull out it will be a complete meltdown of the US.

Our economy and future is completely dependent on China's willingess to enable our entire economy.

petrfitz: please stop your silly yamering...China, Russia, Brazil and India each have stock markets that are down over 50%.

My god Russia just halted trading...China is going nowhere...the only currency anyone can trust is the US dollar...why do you think treasury yields are almost negative. All those countries are buying t bonds, and Fannie, Freddie bonds. The rest of the world is in worse shape then we are

in a sucky world economy the US wins for being less sucky.

No go read a basic economics book

When the dust settles, the finance center of America will have moved from NYC to D.C.

I feel that these times are more like the 70's when manufacturing moved out of NYC and large parts of the city became a ghost town.

flmd - please explain to me that if we are running at a deficit, not including all the off the book spending on our wars, and all the recent government bail outs - where does that money come from?

Are you saying that the US is not borrowing money to flaot our government and the recent bail outs?

FLMD - please see "China's Nuclear Option"

China's economic 'bargaining chip'
David M. Dickson (Contact)
Four years ago, when the foreign-exchange reserves of China totaled about $450 billion and the value of China's holdings of U.S. securities was about $300 billion, former Treasury Secretary Lawrence Summers warned about the emergence of a global "balance of financial terror."

Mr. Summers and others worry that U.S. consumption and investment levels are becoming dependent on "the discretionary acts" of other governments. Foreign governments and investors are accumulating huge pools of dollars by virtue of the massive trade deficits the United States has been running. What these governments decide to do with their rapidly growing dollar reserves could have a huge effect on the U.S. economy.

"There is surely something odd about the world's greatest power being the world's greatest debtor," Mr. Summers told the audience gathered at the Peterson Institute for International Economics in Washington.

"It surely cannot be prudent for us as a country to rely on a kind of balance of financial terror" that exists today, he said.

Since Mr. Summers' March 2004 speech, the United States has racked up an additional $1.2 trillion in budget deficits and about $3 trillion in trade deficits, including more than $900 billion in merchandise trade deficits with China alone.

China's currency reserves have kept growing since 2004, in tandem with its ever-expanding trade surpluses and foreign direct investment, which has built many of China's export-generating factories. So-called "hot money" has also been pouring into China seeking to reap the gains from its slowly appreciating currency.

Not surprisingly, China's foreign-exchange reserves have soared, quadrupling from $450 billion in early 2004 to more than $1.8 trillion today. The International Monetary Fund expects China's currency reserves will exceed $2.4 trillion by next year.

China's holdings of U.S. securities have increased from $300 billion in March 2004 to more than $900 billion in June 2007, the latest date for which data are available. Given America's $250 billion trade deficit with China over the past year and the steady stream of money pouring into the country from abroad, economists believe China probably holds nearly $1.2 trillion in U.S. securities today, mostly Treasuries and corporate bonds.

And that doesn't include the roughly $140 billion in U.S. securities held by Hong Kong.

China syndrome

China has recycled much of its trade surplus with the United States into U.S. Treasury and corporate debt securities. This policy increases demand for the dollar, raising its value higher than it otherwise would be. The policy also keeps the value of China's currency, the yuan, lower than it otherwise would be. That makes China's exports cheaper and more competitive, contributing to rising trade friction with the United States.

The composition of China's foreign-exchange reserves is a state secret, but most experts believe dollars account for 70 percent to 75 percent of the total.

Clearly, the United States is becoming increasingly reliant upon China to finance its budget deficit, which will likely triple this year, jumping from $162 billion in fiscal 2007 to nearly $500 billion in fiscal 2008.

The Treasury Department doesn't think that's a problem.

"We're part of a global economy in which U.S. investors buy assets abroad and foreign investors buy assets in the United States," said Robert Saliterman, a Treasury Department spokesman for international affairs.

"A great deal of foreign capital — nearly $2.1 trillion last year — flows into the United States because the U.S. has the largest, most open economy in the world, and our capital markets are the deepest and most liquid," he explained. "Foreign investment in the United States comes from a diverse group of countries and finds its way into a diverse range of direct investments, securities purchases and bank deposits."

Meanwhile, China, particularly through its central bank, has become the primary financier of America's budget deficit by using much of its trade surplus with the United States to purchase Treasury debt. At the end of fiscal 2007, China owned 21 percent of the U.S. publicly held debt that was owned by foreigners, and it was buying more than half of the new debt being issued by the federal government.

The Treasury Department doesn't think that's a problem, either.

"The market for U.S. Treasury securities is deep and liquid and continues to be attractive to a broad and diverse pool of investors," Mr. Saliterman said. "About $5.3 trillion of Treasuries are held in the public markets. We don't believe that the decisions of any individual buyer of our securities would affect the overall Treasury market given the broad set of investors in the market."

The 'nuclear option'

China's state-run media has begun expanding upon Mr. Summers' "balance of financial terror" metaphor by occasionally threatening to exercise China's "nuclear option." That is the explicit threat to dump massive amounts of dollars on world markets to turn the steady decline of the dollar into a complete rout.

That could force big increases in U.S. interest rates and push the economy into a prolonged recession, analysts say.

"China has accumulated a large sum of U.S. dollars," He Fan, an official at the Chinese Academy of Social Sciences, wrote last August in an op-ed in the state-controlled China Daily newspaper.

Mr. He's article appeared as members of Congress were demanding that China increase the value of its currency to reduce its trade surplus with the United States. "The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," Mr. He warned.

The dollar has declined about 25 percent since 2002 against a broad index of currencies of America's trading partners. Many economists, including Federal Reserve Chairman Ben S. Bernanke, believe the dollar's depreciation has contributed to the soaring price of oil, which is priced in dollars. Thus, among other unpleasant results, the "mass depreciation of the dollar" projected by Mr. He could cause oil prices to skyrocket and give American consumers reason to remember $4 gasoline as "the good old days."

Meanwhile, Xia Bin, finance chief at China's Development Research Center, was suggesting that China could use its foreign reserves as "a bargaining chip" to prevent a few "silly senators" from setting U.S.-Chinese economic policy.

A few days later, however, China's central bank downplayed the threats. The government's Xinhua News Agency quoted an unnamed central bank official as saying, "China is a responsible investor in international financial markets, and our country's foreign-exchange reserves are managed with the operational goals of safety, liquidity and profit." U.S. dollars are "an important part of China's foreign reserve investments," the official said.

Li Yang, a former adviser to China's central bank, indicated in November that China is not likely to divert its existing reserves away from the dollar to other currencies. "If we want to change the currency composition of foreign-exchange reserves, we should use new, incoming reserves," he told reporters attending a financial forum in Beijing.

Nobody disputes that China's reserves are growing at a breathtaking pace and that China is rapidly becoming a financial powerhouse.

"In April alone, China's foreign-exchange reserves increased by $74.5 billion, which, China Daily helpfully reported, was more than $100 million per hour," said Charles McMillion, president and chief economist of MBG Information Services.

"China's financial muscle has soared over the past five years," Mr. McMillion said, citing "the rocketing financial clout of state-owned companies."

China's foreign-exchange reserves have increased tenfold since 2000, rising from less than $170 billion to more than $1.8 trillion today. China's current stash of reserves would be much higher if the country hadn't spent a big chunk of them in recent years to recapitalize state-owned banks, which were considered to be basket cases earlier this decade.

That is clearly no longer the case, Mr. McMillion said.

Nor does China's stockpile of foreign-exchange reserves include the $200 billion it spent to fund its sovereign wealth fund, China Investment Corp. (CIC), which began operations in 2007 and spent $3 billion in June 2007 for a 9.4 percent stake in the Blackstone Group, one of America's largest private-equity firms. In December, CIC put down $5 billion for a 9.9 percent stake in Morgan Stanley, one of Wall Street's biggest investment banks.

'Mutually assured destruction'

"There is a balance of financial terror," Carl Weinberg, a China expert at High Frequency Economics, acknowledged in a recent interview. "But mutually assured destruction guarantees that neither side will pull the trigger. The Chinese have more to lose than we do," he said, noting that China's foreign-exchange reserves are half the size of its gross domestic product and account for half of China's monetary base.

"By buying dollar assets in order to keep its currency artificially low, China has become incredibly dependent on exports to the United States," said Josh Bivens of the Economic Policy Institute, a Washington-based think tank.

"If China dumps dollar assets on the world market, the reverse will happen: The yuan will appreciate" much more than it has already, "and China's exports to the United States will decline," Mr. Bivens said.

"Most of the problems from this massive accumulation of reserves are faced by China," especially the inflationary pressures that are intensifying there, argued Virendra Singh, senior economist at Moody's Economy.com. "The inflationary surge in China is less driven by food, energy and other commodities. Rather, it is a monetary phenomenon," driven by "hot money" flooding into China in search of higher interest rates and gains from the appreciation of China's currency, Mr. Singh explained.

"If China sells dollar assets," Mr. Singh asked, "what are they going to buy? There are not enough euro assets. China faces a physical constraint." For the short and medium term, he said, "the United States and China are joined at the hip. Basically, we are stuck with each other."

Chinese workers are increasingly questioning why their government has pursued a policy that keeps U.S. interest rates low, thereby subsidizing U.S. investment and consumption, while there are so many unmet needs in China. Chinese authorities "must demonstrate that the $1.8 trillion of reserves are a net benefit to China, both in terms of policies that gave rise to these reserves and how they are employed," said Edwin Truman, a senior fellow at the Peterson Institute.

Moreover, China cannot discreetly unload its dollar assets.

"You can't sell $500 billion in Treasury securities overnight," Mr. Truman said. "If you do try to sell the securities rapidly, you will depreciate the value of existing holdings." That would generate a huge capital loss, calling into question why such a massive stockpile of dollar reserves was accumulated in the first place, Mr. Truman explained.

"The United States is by far the most important market for Chinese exports," said Alan Tonelson of the U.S. Business and Industry Council, which advocates taking aggressive retaliatory action against China for its unfair trade practices.

"China is desperately trying to keep a lid on unemployment, and job No. 1 for the Chinese leadership is to keep their jobs," Mr. Tonelson said. "We hold all the cards, despite the huge debt, but we refuse to play them."

Spreading the wealth

"China's national wealth is in dollars, for better or worse," said James Freeman of the Center for Strategic and International Studies. "It keeps them up at night."

For years, China was content to concentrate its dollar investments in U.S. debt instruments. Only Japan holds more Treasury securities than China, but China is by far the biggest foreign investor in asset-backed securities issued by Fannie Mae and Freddie Mac.

By creating its sovereign wealth fund, CIC, China signaled its intention to diversify some of its reserves from lower-yielding dollar debt securities into higher-yielding equity positions, probably both in dollars and other currencies.

Diversification appears to be China's long-term strategy.

"The United States welcomes foreign investment, including investment from sovereign wealth funds," said Mr. Saliterman, the Treasury spokesman.

There may be a fine line between the benefits America derives today from China's willingness to finance the U.S. budget deficit and the problems that could begin to mount tomorrow as China increasingly diverts its financial resources into America's strategic economic sectors.

Mr. Summers and others are concerned that America's rising foreign debt is financing consumption rather than private investment. China is now in a position to use the reserves it has accumulated from its consumption-driven trade surpluses with the United States to embark on a spending spree purchasing U.S. corporate stocks at dollar-depreciated, bargain-basement prices. Suddenly, short-term benefits could evolve into long-term problems.

"So far, China has played a helpful role in the United States" by financing America's budget deficits at interest rates lower than would otherwise apply, said William Cline, a senior fellow at the Peterson Institute.

"If China diverted Treasuries to stocks, however, a main problem could be a gradual increase in its control of key sectors of the U.S. economy," Mr. Cline said. If it were inclined to do so, "China could purchase General Motors with its petty cash."

"At a time when GM, Ford, our airlines and our banks and financial institutions are very highly leveraged and desperate for capital, China is sitting on an incredible stash of cash, and they can do with it as they please," saidMr. McMillion.

Mr. Cline has recently calculated that the cumulative market capitalization of the world's 25 largest commercial and investment banks totals $1.1 trillion. Thus, using less than 20 percent of its dollar reserves, China theoretically could purchase 20 percent of the stock in the world's 25 largest banks.

Even if China's diversification strategy unfolds gradually over the long term, it could present problems for the United States.

"If China tries to diversify out of dollars, that would increase U.S. interest rates, and asset prices would fall," said James Dorn, a China expert at the Cato Institute. As a result, it would be more costly to finance both the budget deficit and the trade deficit.

Earlier capital inflows financed investments in railroads, telecommunications and other productivity-enhancing initiatives undertaken by private businesses. Today, Mr. Dorn said, the flood of capital pouring into America has financed public spending and private consumption.

"As long as we live beyond our means, we must borrow. Higher interest rates in the United States could cause a recession or make one deeper than it otherwise would be," Mr. Dorn said.

Mr. McMillion views China's diversification efforts warily. Given CIC's purchases of Blackstone and Morgan Stanley stock, "it's very clear that [CIC] is buying access - lobbying, basically," he said. "China wants to get a seat at the table to make sure the most powerful financial and industrial leaders in the world are in its corner."

China's reserves and national security

Under China's diversification strategy, Mr. McMillion expects to see "a vast increase of Chinese participation in key companies in the U.S. and throughout the world to get access and control over patents, talent, natural resources, brands and distribution channels."

He has little confidence in the Committee on Foreign Investment in the United States (CFIUS), an interagency committee that scrutinizes the potential national-security implications of foreign investment in the United States.

CFIUS is a very political process that is very conflicted, Mr. McMillion said, "particularly with the key role of the Treasury Department, which doesn't want to disrupt the financial markets."

Mr. Tonelson, of the U.S. Business and Industry Council, called the CFIUS process "woefully inadequate."

The Treasury Department disagrees.

"If genuine national-security concerns arise, CFIUS provides robust reviews of transactions and heightened scrutiny of foreign government-controlled investments," said Mr. Saliterman, the Treasury spokesman.

Larry Wortzel, the current chairman of the congressionally mandated U.S.-China Economic and Security Review Commission, said he was less concerned with China pulling out of Treasury securities and "more concerned about the national security implications of equity investments in U.S. companies and technologies, which could lead to them acquiring assets or information that otherwise would not be released to China."

China's enormous foreign-exchange reserves provide the Chinese government with "an immense amount of resources to build up the Chinese military," Mr. Tonelson said. This explosive growth of China's wealth means that its communist government will be less constrained by the guns vs. butter trade-offs that all governments face, he explained.

Brad Setser, a fellow at the Council on Foreign Relations who has written extensively on America's growing dependence on foreign capital, especially from China and other nondemocratic regimes, explained how this trend can evolve over the long run to America's detriment.

China and America clearly have a symbiotic relationship. China heavily relies on Americans to purchase its exports, and America heavily relies upon China to finance U.S. deficits at low cost.

"It gives rise to the possibility that this level of interdependence may create leverage for one of the two parties in the relationship, and that includes the possibility that China can be the one with the leverage," said Brad Setser, a fellow in geoeconomics at the Council on Foreign Relations. "The national security implications, not just the economic implications, of America's heavy reliance on nondemocratic governments to finance its trade and budget deficits deserve more attention."

Mr. Tonelson was more blunt. While he believes America has the advantage today in the U.S.-Chinese relationship, he worries that the long-term trend is moving in the other direction.

"What's most disturbing about the U.S. situation is that as America's debts rise higher and higher, the less influence the American government will have over the critical decisions" that will need to be made to address these imbalances," Mr. Tonelson said. "Those critical decisions will be made in Beijing, not in Washington, and they will be made to promote Chinese economic and national-security interests."

Mr. Dorn, of the Cato Institute, has a different perspective on the threat to national security.

"The greater national security threat would come from U.S. protectionism, which would embolden Chinese hard-liners, who would argue that the United States is trying to thwart China's development," he said.

Inevitably, American and Chinese negotiators will square off over geopolitical issues in the future. Presumptive Democratic presidential nominee Sen. Barack Obama acknowledged the potential American disadvantages when he observed earlier this year, "It's pretty hard to have a tough negotiation when the Chinese are our bankers."

Noting America's "unprecedented level of foreign borrowing," Pete Peterson, the former commerce secretary who founded the Peterson Institute and co-founded Blackstone, recently told reporters at a Christian Science Monitor breakfast, "I assure you it won't be too long before we start looking like a developing country."

Mr. Peterson is worried that Congress and the White House won't do anything about America's long-term fiscal problems until a crisis erupts.

"The most likely crisis will come from the foreign capital markets, when they lose confidence and stop funding our deficits," he said. "The dollar would fall steeply and suddenly, and interest rates would rise dramatically."

Told that numerous economists downplayed the likelihood that China would execute the "nuclear option" and dump Treasury securities, Mr. Peterson recalled the 1956 Suez crisis. In order to force Britain to end its military occupation of the Suez Canal, which Britain, France and Israel had seized after Egypt nationalized it, President Eisenhower threatened to dump U.S. reserves of the British pound on the world market - a move intended to trigger a collapse of the British currency. With the pound under pressure, the British government was forced to resign and withdraw.

Confident that he had made his point on the pivotal role currency reserves can play in a geopolitical crisis, Mr. Peterson saw no need to draw an analogy between the Suez spat involving America and Britain and a potential crisis pitting America against China in the Taiwan Strait.

At that point, Mr. Summers' "balance of financial terror" could be joined by a balance of military terror.

Dow 8,000.

I am a long-term bull on BRIC, but have pulled all my money out, gone 2x bear. It is obvious that hedge funds and investment banks have pulled or are pulling all their money out. Brazil is down 40% for no fundamental reason, and China is down 50% for no obvious reason. They're being traded like commodity plays though they're not.

Nothing will stabilize until housing stabilizes. What we have seen - and Bernake recognizes this, to his credit - is that we have been living through an asset inflation cycle not unlike the price inflation cycle of the 1980's. Unfortunately, assets aren't measured as part of inflation, so the government can't respond to bubbles.

Nothing is going to stabilize until housing stabilizes, and it's not halfway done yet because it will overshoot. There is no credit. Banks are rebuilding balance sheets (as am I!) and are risk-intolerant. The government just became the biggest private enterprise in America. Jobs - especially here - are being slashed. No more huge Wall Street bonuses because there will be no more independent investment banks. Hedge funds will be regulated since unwinding a bad hedge-fund bet - and they occur all the time - can have a broad effect on the economy.

It's the dawn of a new age which unfortunately cost me some money, but I've come to terms with it since it was only on paper anyway. The real worry is real losses on real estate, which are going to be really, really big.

I'm waiting for HGTV to start a new show, "My House Was Worth What?"

I am officially predicting the bottom at Dow 4,712.60.

I am predicting the Dow to be trading in Yuan instead of USD.

I say buy stocks.