Lehman Brothers

[tabs]

I didn't watch the last hour slide..I needed to go to WAMU.

Anyway closing on the low of the day does not warm my heart. Just makes me more nervous than this morning. Not a good sign.

Seems like the market discounted LEH, MER/BAC and AIG seemed to be the focus of the day. Std Poors did not down grade at least till Wednesday. They need 20B bridge loan until they can sell some of their assets for FMV.

Fed is going to have to take action, somebody is going to have to take action. OR else. One ray is that oil has droped to $94 and change today.


Money was disappearing faster today then it could be printed.

[dd74]

Originally Posted by The Gaijin

No not Buick's to China. That would add up to .001%.


And did not make up the 3.1% figure.


But don't worry. We are in a recession and we need "change". And apparently we will continue to need change til Obama is elected.

The president isn't the answer. (More) Manufacturing is. More Americans put back to work.

Where's FDR and "The New Deal" when we need it?

[Porsche-O-Phile]

I'm sticking with my prediction from early this year that the DOW will be sub-10,000 by the end of the year or early 2009 at the latest. "Bottom" won't be until 1Q or 2Q 2009 probably. Maybe even a little later.

I also think Washington Mutual and Citigroup are dead before this thing starts to turn around.

[The Gaijin]

Originally Posted by dd74

The president isn't the answer. (More) Manufacturing is. More Americans put back to work.

Where's FDR and "The New Deal" when we need it?

You mean like building offshore research and drilling rigs and platforms?
Sorry. We hardly do that anymore...

Or maybe building nuclear power plants?? No - we are worried that plants built in the 60s, designed in the 50s and blew up in the 70s are our only option. That may not happen....

Face it dd - low end manufacturing is dead. Or is not 20 million illegals enough for you?? Not like you (or your kids) want an assembly line job.

FDR was along time ago..

[dd74]

Originally Posted by The Gaijin

You mean like building offshore research and drilling rigs and platforms?
Sorry. We hardly do that anymore...

Or maybe building nuclear power plants?? No - we are worried that plants built in the 60s, designed in the 50s and blew up in the 70s are our only option. That may not happen....

Face it dd - low end manufacturing is dead. Or is not 20 million illegals enough for you?? Not like you (or your kids) want an assembly line job.

FDR was along time ago..

I have a problem deciphering whether or not you're sarcastic or a defeatist in this last post.

[The Gaijin]

Originally Posted by dd74

I have a problem deciphering whether or not you're sarcastic or a defeatist in this last post.

Unfortunately a bit of both..

High end construction/manufacturing jobs in this county go unfilled to a lack of skills and a million other reasons. I have been there. They cant get people.

Billions and billions we send overseas could be spent here. Particularly in the energy sector.

We live a world with no real conversation or debate about the future or how technology keeps moving forward.

How many oil spills in the gulf lately?? Why would drilling in Florida, California or Alaska be so bad?

When was the last nuclear power plant built and added to the grid??

[turbo6bar]

Originally Posted by jyl

BTW, I don't think tabs is overstating the seriousness of all this. We are skidding toward the cliff's edge, counter-steering like mad - hope we catch the skid before going over.

Anyone familiar with my rants about real estate and the economy know I'm far from an optimist. However, if we're really so close to the edge, why didn't the Treasury department fire up the printing presses to buy out LEH?

Do the FED/Treasury department realize they are pushing on a string? Are they out of bullets? Is LEH not worth saving?

John, I sold my 911 and bought an M3. My ride handles much better than a 911, so there's little risk of me going over the cliff. You ass draggers better not take me out, OK?
jürgen

[jyl]

Treasury and Fed must believe that the fallout from a LEH BK, in the event they could not pressure Wall Street into doing a private rescue, was manageable.

And they must have a view on the benefits of letting LEH fail. One benefit would be to force other vulnerable institutions to sell themselves and thus accelerate the consolidation of the financial industry.

There is money out there - private equity, vulture funds, guys like Buffett, and cash sitting on the sidelines at other investors including sovereigns. There is a ton of money waiting. Off the cuff, it could well total several trillion dollars. But that money is sitting on its hands, it believes that troubled institutions and their troubled assets are still being valued too richly. It won't step in until there is even more blood in the streets.

The govt should know pretty well what exposure other financial institutions have to LEH as counterparty and as debtor, and what the realistic liquidation value of LEH's assets are. I would expect them to have the financial numbers right.

What they also need to get right is the investor psychology. E.g. as soon as Treasury received the legal authority to take over FNM/FRE and subordinate/wipe out common and preferred equity - the so-called "bazooka" - arguably that eliminated any chance for FNM/FRE to raise additional equity capital - since any potential new equityholder knew they'd be stepping into the bazooka's sights. I guess it is possible that the govt did not foresee that investor psychology.

So, hopefully they have got both the numbers and the psychology right. For LEH and for AIG, and for the other institutions that will fail.

Originally Posted by turbo6bar

Anyone familiar with my rants about real estate and the economy know I'm far from an optimist. However, if we're really so close to the edge, why didn't the Treasury department fire up the printing presses to buy out LEH?

Do the FED/Treasury department realize they are pushing on a string? Are they out of bullets? Is LEH not worth saving?

John, I sold my 911 and bought an M3. My ride handles much better than a 911, so there's little risk of me going over the cliff. You ass draggers better not take me out, OK?
jürgen

[competentone]

Originally Posted by jyl

Treasury and Fed must believe that the fallout from a LEH BK, in the event they could not pressure Wall Street into doing a private rescue, was manageable.

And they must have a view on the benefits of letting LEH fail. One benefit would be to force other vulnerable institutions to sell themselves and thus accelerate the consolidation of the financial industry.

There is money out there - private equity, vulture funds, guys like Buffett, and cash sitting on the sidelines at other investors including sovereigns. There is a ton of money waiting. Off the cuff, it could well total several trillion dollars. But that money is sitting on its hands, it believes that troubled institutions and their troubled assets are still being valued too richly. It won't step in until there is even more blood in the streets.

The govt should know pretty well what exposure other financial institutions have to LEH as counterparty and as debtor, and what the realistic liquidation value of LEH's assets are. I would expect them to have the financial numbers right.

What they also need to get right is the investor psychology. E.g. as soon as Treasury received the legal authority to take over FNM/FRE and subordinate/wipe out common and preferred equity - the so-called "bazooka" - arguably that eliminated any chance for FNM/FRE to raise additional equity capital - since any potential new equityholder knew they'd be stepping into the bazooka's sights. I guess it is possible that the govt did not foresee that investor psychology.

So, hopefully they have got both the numbers and the psychology right. For LEH and for AIG, and for the other institutions that will fail.

The government did not just "step aside" and let LEH fail. They lied to the public, pretending that "they're not going to bail 'everyone' out," but have already funneled $138 billion to cover Lehman's defaults:

>>>Sept. 16 (Bloomberg) -- JPMorgan Chase & Co. gave $138 billion this week in Federal Reserve-backed advances to the broker dealer unit of Lehman Brothers Holdings Inc. to settle Lehman trades and keep financial markets stable amid the biggest bankruptcy in history, according to a court filing. <<<

The whole article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX7mhYCHmVf8&refer=home

Wall Street, with the Treasury and Fed's assistance, is raping Main Street and transferring hundreds of billions in losses from the private sector to the taxpayer.

We are witnessing the largest robbery in the history of the world -- and the criminals robbing the public are selling their theft as "doing a good thing."

If you have investments in the stock market, GET YOUR MONEY OUT NOW!

[Milu]

The latest development is that Barclays is buying, subject to Bankruptcy court approval, the N. American trading unit and NY headquarters after weekend negotiations. They did not want Lehmann's "toxic investments in the residential and commercial property markets".

[jyl]

Looks like Barclays got a steal. $1.7BN for LEH's North American investment banking and capital markets business plus NYC headquarters and data centers. The real estate is reportedly worth $1.5BN so they're paying just $200MM for a major i-banking business. Plus in talks to buy LEH's Asia, Europe business.

Similar going on in UK. Lloyds TSB looking to buy mortgage lender HBOS whose shares are in tailspin.

[turbo6bar]

From Interest Rate Roundup: http://interestrateroundup.blogspot.com/

Not to incite panic or anything. But the credit markets are absolutely coming unglued this morning. A few examples:

* LIBOR rates are surging. For instance, three-month U.S. LIBOR jumped almost 19 basis points today after rising 6 bps yesterday. At 3.06%, it is well above the federal funds rate of 2%.

* The yield on the 3-month Treasury Bill is plunging -- to just 0.28% from 0.69% yesterday and 1% the day before that. This is the lowest T-Bill rates have been since at least 1954.

* A major U.S. money market fund -- Reserve Primary Fund -- "broke the buck." This is the oldest fund of its type, and shareholders yanked more than 60% of the fund's $64.8 billion in assets after losses on Lehman debt forced its net asset value below the $1 level.

* The TED spread - the difference between the yield on three-month Treasury bills and three-month LIBOR -- blew out to 280 basis points, the highest level since the 1987 stock market crash.

* 2-year swap spreads have exploded -- recently up 21 basis points to 128. This is the highest level since at least 1988 (the farthest back my data goes -- see chart above).

[Rick Lee]

Turbo6bar, can you please give me a quick explanation as to why LIBOR is skyrocketing? I thought it typically went down with our own T-bills. I know they're not linked with each other, but I thought they basically paralleled. My ARM is tied to LIBOR and, although I have another 14 mos. to worry about it, I am keeping an eye on it periodically.

[turbo6bar]

Rising LIBOR is a reflection of the fear and risk in the market. Banks don't want to lend precious capital.

The falling treasury rates is a reflection of demand and desire for security. Investors would prefer the safety of T-bills yielding 0.28% vs hold equities, commodities, or credit instruments.


When perceived risks were low, LIBOR, T-bills, and the Federal Funds Target Rate moved together, but the financial crisis has changed the game.
Jurgen

[Rick Lee]

Geeze. I hope LIBOR comes back down in the next year or so.

[turbo6bar]

Yeah, you and AIG are thinking the same. Their $85B loan is at 850 bp above LIBOR. They must be really hurting to take those terms.

More from the "ruh roh, raggy" file:

Morgan Stanley CEO:'Need a partner or not going to survive'

Seeking to avoid the kind fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley’s chief executive, made an unsuccessful attempt Tuesday evening to convince Citigroup chief executive Vikram S. Pandit to enter into a combination, according to people briefed on the talks.

“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks.

Please, Bernanke, give us an emergency 300 bp rate cut.

[HardDrive]

Originally Posted by competentone

If you have investments in the stock market, GET YOUR MONEY OUT NOW!

Yes, yes, lets all panic. Make sure you head to the bank with a torch and pitch fork in the morning and get out all of your money money tomorrow as well.

There is only one thing that matters in this equation, and that is the liquidity of the Treasury. The lender of last resort. As long as they can raise capital, there is no issue here. Are people going to get hurt? Off course. But the overall system is fine if people out there are still will to buy Treasury bills. And the funny thing is, they don't really have a lot of good options. How many buildings can you build in Dubai?

[competentone]

Originally Posted by HardDrive

Yes, yes, lets all panic. Make sure you head to the bank with a torch and pitch fork in the morning and get out all of your money money tomorrow as well.

There is only one thing that matters in this equation, and that is the liquidity of the Treasury. The lender of last resort. As long as they can raise capital, there is no issue here. Are people going to get hurt? Off course. But the overall system is fine if people out there are still will to buy Treasury bills. And the funny thing is, they don't really have a lot of good options. How many buildings can you build in Dubai?

Actually, you've taken my "Get your money out now" comment out of context.

The overall system is not fine, as I have been explaining on other threads. My comments about getting out of the market are not "panic," but a rational reaction to the events occurring in our economy.

I try not to repeat myself in responses on different threads, but my comment:

If you don't know exactly what you own in "investments" and have a rock-solid understanding of the reasons why you own what you own, you should get out of whatever you're in and get into something you understand completely. (Preferably, some type of hard asset, as the current failures are likely to topple our entire fiat money system.)

I used on another thread, is my suggested reaction, not any sort of "blind panic."