Tags: wall street

dd2guy

the world ends with you

The federal government bought out AIG. They didn't want to send the wrong message to other insurance companies, so the conditions were harsh--Uncle Sam gets a 80% stake in the company and veto power over its leadership, and the company has to pay off all the money the government lent it (all $85 billion or so) at 11% interest. This is essentially an emergency government takeover of a very important private institution. Libertarians are already crying foul (and socialists rejoicing), but the implications of this move are for the future to decide. What matters is that any money you may have lost in the Lehman brothers collapse (aside from the falling value of stocks, which will hopefully eventually be recoverable) is insured. Better still, British bank Barclays has bought out Lehman Brothers's consumer assets, including all the accounts people had with them, so even former Lehman customers can breathe a little easier. For now, a Great Depression style collapse has been avoided.

That's not to say the markets are fine, or even on the road to recovery. Despite the buyout of AIG there was another crash today--the Dow fell 450 points--and now the last two major independent brokerages, Morgan Stanley and Goldman Sachs, are in immediate danger of suffering the fate of their peers. On TV news Morgan Stanley's already talking about fleeing into the arms of some other firm (any other firm), and Goldman Sachs is reporting record losses. With Bear, Lehman, and Merrill already gone, the last two horsemen of the apocalypse are getting ready to ride, sending investors fleeing to the safety of their teddy bears. Those teddy bears are the safest investments on the market, the ones you only invest in if you are okay with making no profit at all--the strength of the market for gold and Treasury bonds today was what one commentator called "absolutely absurd". Apparently (and I can mention this because it's old news) there was even a run on mattresses in Manhattan today. Some claim this is because investors are sleeping in their offices to monitor the situation; others say it's because it's the last safe place for them put their money. My guess is that they just want a flat surface to lie on while the market fucks them in the ass.

But you know what? I really can't bring myself to care. With the government running AIG and Congress holding emergency session after emergency session to intervene, there is now a solid wall of cash between what is going on in Wall Street and everyday life for ordinary Americans. Lots of very rich people right now are going to be a lot poorer, and Wall Street is undergoing some historic and irreversible changes, but unless commodities don't hit rock bottom (you have to hit rock bottom to bounce back), it's not worth losing sleep over anymore. This isn't my game. In the office the two TVs we always have on are flashing red arrows and using vocabulary like "meltdown" and "historic" and "epic proportions"--if I hear "in my X years in the business, I've never seen anything quite like this!" one more time I'm going to have to choke somebody--and dethroned CEOs are screaming "I lost my net worth over this. My entire net worth!!" on the news and folks in the office are ending personal calls with "Don't jump," and I just go SHUT UP WORLD and code. The Man (the political-corporate elite, not some illusory white racist conspiracy) squeals real loud when he gets punched in the balls, but it's got nothing to do with me. For now, you guys are good, I'm good, America's good, and Wall Street can go to hell.

I hate money. I don't want to post about finance on this blog ever again.

So tonight I went to see my Oberlin acquaintance Tom Curtin perform at the Sidewalk Cafe in the Lower East Side. Now that I'm a novice (not even amateur) guitarist myself, I tend to get mixed feelings when I see a really talented, better-than-amateur musician performs in front of a really small crowd. Don't get me wrong, it was a good show--a really good show. Tom's quite formidable with an acoustic, and he's reached that rare level of mastery in which his passion for the music and his technical expertise perfectly augment, not interfere with, each other. That's a very enviable quality, and watching his fingers move over the fretboard as he belted out soulful self-penned melodies about gay senators and the twin children of necromancers helped me understand that playing that well takes so much more than strumming the right chords to the right beat. If he was kind enough to write up the tabs for his songs, I could probably learn one in a month, but it'd take years before I could know the instrument well enough to perform with his candor and musicality, much less bring the songs I've written to life the way he does. His lyrics are silly, often frivolous--they seem to hint at greater meaning, the way a lot of indie folk bands do, until you listen closely and realize that singing "There are flies in my mouth!" over and over again doesn't actually mean anything but "There are flies in my mouth!" And yet there's so much genuine feeling in the way he sings "There are flies in my mouth!" that you can't help but feel moved by the tragedy of all those poor insects trapped within his maw. That's the difference between a true musician, like Tom, who has mastered his instrument well enough to focus on the music and not the playing, and a novice, like me, who can only strive to imitate the sounds he likes to hear. What's a little depressing is that his talent was not proportional to the attention he got. I understand it was a Wednesday night in an obscure restaurant/bar in the Lower East Side, but there were maybe eight people there tonight, and I think most of them knew Tom personally. They were the people who would come see him and cheer and clap even if he wasn't an amazingly talented musician. Does Tom Curtin even know how good he is?

(This is his MySpace page, by the way. As of now, he has two songs up there, "Noble One" and "The Optometrist Song." Neither of them are his best, but they're both pretty good.)

Also...I will never be one of the cool kids. But that's a rant for another day.
toroko

time to party like it's 1929

I didn't feel comfortable talking about this at work, due to the non-disclosure clause in my contract, but hell, this is very public news by now. Guess what day it is today?

Yes, that's right! It's BLACK MONDAY!

Five hundred points. The Dow dropped five hundred points. In one day. You aren't supposed to ever see numbers like that on the stock market. Scroll down--look at all that red. Basic materials? Down. Capital goods? Down. Energy, financial, healthcare, services, technology, transportation--Google Finance is barely scaled to even measure those numbers. Every good, service, commodity--gone to shit. Around lunchtime, they announced that the markets had surpassed the levels of the 1987 crash (for which there is a bronzed statue outside the stock exchange in the memory of all the traders who committed suicide that day) in terms of losses. By the end of the trading day, the only worse day for Wall Street in the entire history of American finance was the start of the Great Depression.

My friends, there is no hiding it. We are in the middle of a bona fide stock market crash.

And you know what's really weird? No one's freaking out just yet. AP, Reuters, AFP all sent photogs down to the stock exchange to snap pictures of emoting dramatically in despair, and if the Yahoo! News archives are any indication all they got were a bunch of calm Indian techs and a Middle Eastern guy with a migraine. Everyone's worried--everyone's holding their breath--but no one's jumping out of windows just yet. This, I suppose, is because everyone knows what happened--and everyone saw it coming.

Now I'm not an economist myself--I've never taken more than Econ 101--so let's go at this from a layman's perspective. Here's my potentially flawed understanding, from a dozen news channels and a bunch of informal conversations with knowledgeable but uninvolved people. Suppose you owe somebody money. You've got to borrow from someone else to pay off that debt, right? And if that someone else doesn't have enough money to lend to you, that person has to borrow from someone else. And that person has to borrow from someone else, and that person from someone else, and so on. At the highest level, for a consumer, someone is going to borrow from a bank. And what if the bank doesn't have enough money? Then they borrow from a bigger bank, and a bigger bank, and sooner or later it goes to the five biggest broker/banks--all of which borrow directly from the Federal Reserve. Which the Federal Reserve doesn't do often, because that means inflation. Keeping a fixed amount of money in the system prevents the economy from exploding.

My understanding is that when the subprime crisis first hit several months ago, the chain of debt ballooned so immensely that it brought down one of those five biggest broker/banks, Bear Stearns. That shook up the market a little but, but the Federal Reserve cut their lending rate for interest and the other banks picked up the slack, so everything was fine. But the problem didn't go away. Two days ago, Lehman Brothers--one of those other super banks, which survived both the Great Depression and the '87 crash--ran dry, and filed bankruptcy. Not long after, Merrill Lynch, another one of the Big Five, looked like it was about ready to do so too--and was, until it was immediately and unexpectedly bought out by the Bank of America in a very sketchy deal. The Big Five had become the Big Three. This was not good news.

Because, if your friend can't pay you, and your bank can't pay your friend, and the megabank can't pay the bank, and the money has to come straight out of the Federal Reserve--suddenly, everyone's broke. If you lent money, you can't collect. If you owe money, you can't pay. And that, on a market-wide scale, is a very bad thing. Fewer mega-banks means less competition between them, and less money in the economy overall. But that's not what caused the stock market crash. Oh no.

The problem is that, well, what happens when a company files bankruptcy? It liquidates its assets to pay off its debt. Everything must go. And what assets does a brokerage/holding company/bank like Lehman Brothers have?

That's right. Stocks.

Millions and millions of shares in everything from natural gas to vacuum cleaners are flooding the market right now. So much money and so much debt was accumulated in Lehman Brothers holdings that forcing it to sell at current market price drove down the price of literally everything. Brokers don't seem very optimistic that these stocks will shoot back up anytime soon, so they're exacerbating the problem by selling everything they've got. In theory this will be a temporary effect, as the invisible hand of the marketplace corrects this enormous surge of supply with an equalizing surge of demand. (That's what Bush and his laissez-faire financial advisors are counting on right now--they've officially announced that their response to the crisis is to sit back and do nothing, and let the free market work its magic.) But actual demand doesn't move the market quite as much as perceived demand, and it's pretty obvious right now that shareholders believe everything has gone to shit. Or, rather, they want all the other shareholders to believe that nothing has gone to shit, so they can cut their losses and sell off their stock at a decent price before everything has gone to shit.

The reason why the system worked this way, explained a friend of mine, long before the curent crisis hit, is because the Big Five are inherently stable. If one of those banks goes down, we are all fucked anyway.

Well. We've lost three. That's rather comforting now, isn't it.

In the long run we should be okay--but in the long run we are all dead. (Remember who originally said that? Remember why he said it?) Remember when Jim Cramer of Mad Money shouted "THIS IS ARMAGEDDON!!" at a market shaken by the subprime crisis? Cramer was right. He was just a few months early.

On the news, I've been mostly hearing about two forecasts for what happens next. In the one scenario, the market should bounce back in a few days, as stock prices stabilize, and business will continue as normal on a drastically different Wall Street. Many businesses will close, and the price of commodities will go down (including oil, which already has), making life a little easier for poorer Americans, at least for a little while. Unemployment will soar to even greater levels than we are at now, but at least 401k and other retirement savings will slowly recover as the government works to make sure insurance companies stay solvent (the biggest one, American International Group, is already on its last legs). Eventually America will return to business as usual. But it may take a while.

The other, hopefully unlikely scenario? Inflation skyrockets, the remaining Big Three fold under the stress, insurance companies go belly up, and well...let's just say that pretty soon the only safe investments would be Spam and ammunition.

Someone want to disagree, I'd be glad to be proven wrong. Econ majors? Anyone? Damage control?
dd2guy

get a job, yuppie

No.

No, asshole. Fuck off. I ain't got no handouts for you. What do I look like, a fucking venture capitalist?

Prospectus, huh? Oh? You got a prospectus? "Leveraging our market share to capitalize on synergistic growth opportunities." That's real funny. Real funny. Where'd you learn English, dipshit, the Yale MBA program? Come back when you learn to speak American.

Like I give a fuck that you just bought a limo on your expense account. Maybe you'll be a little more responsible with your money next time. Oh? You've got to make payroll for fifty thousand employees? Really. Really now.

Look, pal. I see you out here sitting your ass out in front of this Starbucks every day, waiting for some fresh capital. I ain't stupid. I know you ain't out here bothering hard-working, decent Americans because you want to invest in new product or get a bite to eat. You white-collar types are all the same. "Oh, look at me, I'm just an honest, upstanding member of society trying to make a decent living! Please give me some money so I can live the American Dream!" Fuck you. You don't know shit about the American dream. If I give you fifty bucks you're just going to blow it on booze, hookers, and cocaine. I bet you'd run straight to the club in your fancy black silk shirt the moment I paid you. You wouldn't even wait until I was gone, wouldn't you.

Answer me. Wouldn't you?

I see scum like you out on the streets every single day. You don't work. You don't pull your weight. You contribute fuck all to society. Whenever you are not flying from city to city in your sorry little luxury jet asking people for money, you are sitting behind a polished mahogany desk in a nice little air-conditioned office ordering people around. While some of us are fixing toilets, writing software, or curing cancer, you are getting paid six figures to guess which stock is going to make your company ten times as much money as the profit it makes selling useful goods and services. And when you're wrong, you don't have to suffer the consequences--your workers do. Look at you, eating at a different French/Korean fusion restaurant every day, sitting in front of your 72-inch plasma TV in your fancy midtown penthouse watching Sex and the City with your three Asian girlfriends. You've never had to cook. You've never had to clean. You've never had to worry about anything but your own ambitions, or give time and effort to being part of a community, or even wipe your own ass. When you fall on your ass a dozen lackeys push you back up from behind and say, "Oh, It's okay! Everyone makes mistakes! In fact, it was our fault! We're so sorry!"

Look. Look me in the eye when I am talking to you. You sorry motherfucker. You don't even know what consequences are, do you. Company loses money, fire some employees. Company goes under, file bankruptcy. State covers it. You always come out on top. Look at you, sitting on that $3000 leather couch, smoking a bowl in your tie and your dress pants. Not a care in the world. You paid people to tell you you're smart, you paid people to tell you you're beautiful, that you made it to the top by hard work and intelligence, and you believe it. Almost.

I bet Mom is real proud of you, isn't she. Real proud. "Oh, look at my son, look how wonderful he is. I'm so happy I raised a fat lazy slob who does nothing all day but eat organic nachos and play Solitaire in his $5000 ergonomic office chair, because he makes six figures and we paid his way through a brand-name business school and that's all that matters to parents like me." I bet she doesn't know about the countless hours you spend alone in your apartment, day after day, surrounded by tasteful Ikea furniture and shelves full of books you never read, staring up into that thirty thousand dollar painting that has never gotten you laid. I bet she doesn't know why you feel so empty when you go to the opera with your personal assistant and can't relate to a single thing that's happening because the entire realm of human experience is alien to you, because you see war and poverty and romance and strife and are reminded only of memorized factoids from your high school history textbook. I bet she's pleased that you've never dated a woman who didn't love money, though I don't think she'd be so pleased if she knew why. I bet she doesn't know about the nights when the party is over and the last of your friends have gone home, and you're sitting on your couch nursing eight half-empty flute glasses of Remy Martin and the rain is thundering against your picture windows at hundreds of miles an hour and you wish you had the balls to punch through the glass and let that shit in.

I bet she doesn't know you've never deserved a single thing you've earned.

Listen to me. Listen to me. You so-called "successful" people make me sick. Sick, I tell you. Our country wastes billions of dollars of taxpayer money on industrial subsidies, trade tariffs, and useless pork-barrel public projects just so that people like you can keep on having champagne and TiVo nights every Wednesday. Wherever you go, the trade in drugs and prostitution flourishes. You drive up land values, sell out our livelihoods to foreign companies, and shackle the invisible hand of the marketplace with monopoly and false competition. The world could be ending all around you, the poor and the desperate could be screaming out for relief, and you, quite literally, could afford to not give a shit.

That's how you deal with it. Isn't it. Write a check, send it to a charity, done. Never have to get your hands dirty, do you. Never have to bring yourself down to bring someone up. You will never have to look into the eyes of someone who needs your help and hates you for it.

I've wasted enough time on you. Some of us have real jobs to go to. Some of us have to dig through trash cans for our evening meals, and have nothing to sell but our own dignity. You really want to turn your life around, you seriously want a hand up, you do it yourself. Sell your shares, quit your post, and start producing some fucking goods and services. Leave the penthouse and the TiVo and the call girls and smack behind. Write a song. Build a house. Flip some burgers. Or leave it all and see how it really feels to be forced to live off the generosity of others. Let's see how well you really go when you've nothing to lean on but your own merits. Let's see how meritocratic you think the job market is then.

Get off me.