We are living in historic times, though I wish I would be writing that for different reasons.
Today's events were extraordinary, capping off weeks of financial meltdown that finally came to a head with a 700bn dollar bailout plan failing to pass in the Congress- this after the President, no less, urged his own party to back it- only one-third did and the plan is now on hold as the politicians take a "well deserved" Jewish holiday break!
I dont think Washington realizes that 1.2 trillion dollars in market value was wiped out today, I dont think any of them get it. As I walked down Tryon Street, there was a pall of gloom across the street in Wachovia, a perfectly sound and stable bank that got sold for less than a dollar a share. A lot of people have their retirements in stock, they have their long term savings in stock and to see all that disappear is shocking. To put it simply, credit is the oil that lubricates the economy and for it to come to a grinding halt, as it almost did today, will be catastrophic for everyone, not just those on Wall Street.
A lot of people are confused about how we got here. Three easy steps- first- "selling" mortgages to those who can't afford it, second- securities getting "sold" in the hope that house prices would go up and so their value getting inflated beyond their true worth, and third- as the housing prices don't go up, the inherent value of the securities comes into question, which tightens the entire credit situation up as no one is really confident about the actual worth of the security. Crystal clear!
This has been a sad day- for investors and the common man. It has been a despicable day for politicians- their unbridled greed, unprincipled partisanship and incorrigible incompetence is something that galls me no end!
Monday, September 29, 2008
The bailout and the vote...
I hate politicians, and have hated them for some time now- I find them self serving, conniving, and inherently deceitful. I stopped following politics in 1995 and I must say for the last 13 years, I have saved myself a lot of grief and wasted time discussing politics- in the newspapers, I turn to sports and entertainment right away and then move to business, I completely skip politics. My life has been inherently happier that way.
Today, unfortunately politics and business met, the politicians had to vote on the 700bn package that actually rescues the common american man and frankly, saves the economy from coming to a complete halt...and once again, the politicians let me down. They voted against it!! This is when we have faced the following situation in the last fortnight-
a) We faced the biggest bank collapse in American history, WaMu
b) Wachovia, the 4th largest bank in the country was sold off for a dollar
c) Lehman went under
d) Investment Banks as we know them don't exist anymore
e) AIG being bailed out for 85bn
f) There has been severe gas shortage in the country with gas lines at pumps not seen since the oil crisis in the seventies.
And what can the politicians think of? How will voters react? How will their contituents react? I used to think Indian politics was a quagmire, it seems no better in Washington.
What is shocking is that President can't get his party to fall in line?!!
And what is their alternative- wait for another 10 banks to fail!!!
I hate politics and politicians- always have and given the events of today, I think always will!!!
Today, unfortunately politics and business met, the politicians had to vote on the 700bn package that actually rescues the common american man and frankly, saves the economy from coming to a complete halt...and once again, the politicians let me down. They voted against it!! This is when we have faced the following situation in the last fortnight-
a) We faced the biggest bank collapse in American history, WaMu
b) Wachovia, the 4th largest bank in the country was sold off for a dollar
c) Lehman went under
d) Investment Banks as we know them don't exist anymore
e) AIG being bailed out for 85bn
f) There has been severe gas shortage in the country with gas lines at pumps not seen since the oil crisis in the seventies.
And what can the politicians think of? How will voters react? How will their contituents react? I used to think Indian politics was a quagmire, it seems no better in Washington.
What is shocking is that President can't get his party to fall in line?!!
And what is their alternative- wait for another 10 banks to fail!!!
I hate politics and politicians- always have and given the events of today, I think always will!!!
Wednesday, September 17, 2008
The Lehman collapse, the AIG bailout and Merrill buyout!
Over the last week, my favorite TV channel has been CNBC- its almost as if you are following a thriller and you dont want to blink as you will miss something.
Its been an unbelievable week- and I was in Vegas on vacation when I first happened to glance at a news item that Lehman was in trouble. I thought, thats not a big deal as a lot of companies have been reporting losses. Being a 150 year old Wall Street powerhouse, even if Lehman was in trouble, the worst I expected was loss in profits, some more writedowns, potential layoffs and that was it. By Thursday and Friday, it was clear that Lehman needed to sell and Bank of America became a leading contended to buy. That piqued my interest.
Our vacation ended Sunday night and as I turned on my computer, I began to follow the saga more closely. It appeared that talks with Lehman had broken down and Barclays was in play for Lehman, not Bank of America. I continued surfing the net and just past midnight on Sunday, bloomberg reported that Bank of America had agreed to buy Merrill Lynch for 50 billion. That was a bolt from the blue- was Merrill even in trouble? What happened to Lehman? And as I looked over, it seemed that Lehman was going to file for Chapter 11. An institution like Lehman in bankruptcy- absolutely unbelievable and seeing the writing on the wall, Merrill did the wisest thing by selling out. Walking into the Bank Monday morning was an absolute rush- lots of excitement, lots of pride about being part of the biggest financial institution that can make a deal of 50 bn literally over a weekend! It was heady and still is...
But this was not all- news poured in that AIG was in trouble and the government was asking the big banks to pony up 75bn to help save the company. Fears about bank run, whether deposits themselves were safe became more real. Comparisons begun to be made with 1929- on Monday, the stock market had its worst day since September 11, 2001- this wasnt recession anymore, we were well and truly in Depression freefall.
Today, every hour, I kept checking bloomberg on AIG as the stock plummeted to 1.47 at one stage, kept bouncing back to 3-ish and back to the high 1's or low 2's. It was like being in an emergency room watching someone on life support and praying. My wife called me in the afternoon to ask me whether we should take out our insurance in AIG. We discussed it for 10 minutes- the longest money discussion we have had in our marriage! We decided against it- we believed the company as strong and too good to be allowed to go belly up. As a mark of my confidence, I bought a few shares of AIG, and given I just came back from Vegas, I was very willing to take on this gamble- much better odds than the roulette!
This evening, even as we went to bed, news arrived about an 85bn infusion into AIG by the government for an 80% stake in the company! Thank God! Its a relief, but we are clearly not out of the woods yet. As our CEO Ken Lewis pointed out, 2009 is going to a tough year but he can see the clouds lifting in 2010- thats still 5 quarters away!!
I turned off CNBC today and moved over to CNN in the hope to catch some political news or hurricane news, but there was Anderson Cooper interviewing Susie Orman on what the financial crisis meant to the common man, comparisons to the Great Depression and the road ahead.
It was then that I realized that maybe, CNBC is going to stay one of my regular channels for the forseeable future, not just last week. It is an exciting time, and reminds me of the old Dickens phrase- "it was the best of times, it was the worst of times" depending upon how you look at things. From my vantage, I am excited about how all this would shake out and eventually lead to a more stable, less exhuberant financial sector that relies on good old basics to make money. I never thought CNBC would be my favorite channel, but it seems thats the only way to keep up to date with a sector that is changing with dizzying speed with each passing second.
Fasten your seatbelts everyone!!
Its been an unbelievable week- and I was in Vegas on vacation when I first happened to glance at a news item that Lehman was in trouble. I thought, thats not a big deal as a lot of companies have been reporting losses. Being a 150 year old Wall Street powerhouse, even if Lehman was in trouble, the worst I expected was loss in profits, some more writedowns, potential layoffs and that was it. By Thursday and Friday, it was clear that Lehman needed to sell and Bank of America became a leading contended to buy. That piqued my interest.
Our vacation ended Sunday night and as I turned on my computer, I began to follow the saga more closely. It appeared that talks with Lehman had broken down and Barclays was in play for Lehman, not Bank of America. I continued surfing the net and just past midnight on Sunday, bloomberg reported that Bank of America had agreed to buy Merrill Lynch for 50 billion. That was a bolt from the blue- was Merrill even in trouble? What happened to Lehman? And as I looked over, it seemed that Lehman was going to file for Chapter 11. An institution like Lehman in bankruptcy- absolutely unbelievable and seeing the writing on the wall, Merrill did the wisest thing by selling out. Walking into the Bank Monday morning was an absolute rush- lots of excitement, lots of pride about being part of the biggest financial institution that can make a deal of 50 bn literally over a weekend! It was heady and still is...
But this was not all- news poured in that AIG was in trouble and the government was asking the big banks to pony up 75bn to help save the company. Fears about bank run, whether deposits themselves were safe became more real. Comparisons begun to be made with 1929- on Monday, the stock market had its worst day since September 11, 2001- this wasnt recession anymore, we were well and truly in Depression freefall.
Today, every hour, I kept checking bloomberg on AIG as the stock plummeted to 1.47 at one stage, kept bouncing back to 3-ish and back to the high 1's or low 2's. It was like being in an emergency room watching someone on life support and praying. My wife called me in the afternoon to ask me whether we should take out our insurance in AIG. We discussed it for 10 minutes- the longest money discussion we have had in our marriage! We decided against it- we believed the company as strong and too good to be allowed to go belly up. As a mark of my confidence, I bought a few shares of AIG, and given I just came back from Vegas, I was very willing to take on this gamble- much better odds than the roulette!
This evening, even as we went to bed, news arrived about an 85bn infusion into AIG by the government for an 80% stake in the company! Thank God! Its a relief, but we are clearly not out of the woods yet. As our CEO Ken Lewis pointed out, 2009 is going to a tough year but he can see the clouds lifting in 2010- thats still 5 quarters away!!
I turned off CNBC today and moved over to CNN in the hope to catch some political news or hurricane news, but there was Anderson Cooper interviewing Susie Orman on what the financial crisis meant to the common man, comparisons to the Great Depression and the road ahead.
It was then that I realized that maybe, CNBC is going to stay one of my regular channels for the forseeable future, not just last week. It is an exciting time, and reminds me of the old Dickens phrase- "it was the best of times, it was the worst of times" depending upon how you look at things. From my vantage, I am excited about how all this would shake out and eventually lead to a more stable, less exhuberant financial sector that relies on good old basics to make money. I never thought CNBC would be my favorite channel, but it seems thats the only way to keep up to date with a sector that is changing with dizzying speed with each passing second.
Fasten your seatbelts everyone!!
Monday, September 01, 2008
Phelps, Bolt and Obama- stories of inspiration and perseverence
August was a difficult month for morning meetings in office- when I was not following the olympics late into the night, it was the Democratic party convention in Denver that kept me awake- the Michelle Obama speech, the Clinton speech, the Biden speech, the Barack speech- it lifted my spirit and made me believe in hope and that anything was possible. Again, let me qualify as I have done previously in my blog, while I am not interested in politics, just in the pure art of speech making and speech giving, if the Democrats win Gold, the Republicans dont even make the podium!
Talking of podiums, the two men who stood out for me were Phelps and Usain Bolt, one I knew before this Olympics, and the other one I had never heard of, but who seemed to possess superhuman quality in the sprints. Bolt's emphatic wins in 100 and 200 with world record times were breathtaking to watch, and given his premature celebratory gestures in the 100, he made us feel he could go better than 9.69, which makes this 21 year old a great athletic prospect for the future. He doesnt have the best of starts, but accelerates remarkably well- if he can add 400 to his repertoire, he could potentially turn out to be greater than Michael Johnson, if not Carl Lewis- he is THAT special.
Phelps made me love swimming more than anyone else. He won in all fashions- with conviction, by the thinnest of margins, leading from the front, coming from behind, as an individual, as part of a team effort- it was an incredible effort and one that is likely to stand the test of time. As my two year old watched the races with a "go Phelps" cheer, I wondered how many budding sportspersons he would inspire.
Even as I watched the closing ceremony with breathtaking awe, I wondered when was the last Olympics when I felt genuinely sad at the closing, and my mind had to go back to 1984 (when Mary Lou and Carl Lewis turned in the performances of a lifetime). I may have been bleary eyed in morning meetings, but I think it was all worth it- there is nothing like watching history being made live!
Talking of podiums, the two men who stood out for me were Phelps and Usain Bolt, one I knew before this Olympics, and the other one I had never heard of, but who seemed to possess superhuman quality in the sprints. Bolt's emphatic wins in 100 and 200 with world record times were breathtaking to watch, and given his premature celebratory gestures in the 100, he made us feel he could go better than 9.69, which makes this 21 year old a great athletic prospect for the future. He doesnt have the best of starts, but accelerates remarkably well- if he can add 400 to his repertoire, he could potentially turn out to be greater than Michael Johnson, if not Carl Lewis- he is THAT special.
Phelps made me love swimming more than anyone else. He won in all fashions- with conviction, by the thinnest of margins, leading from the front, coming from behind, as an individual, as part of a team effort- it was an incredible effort and one that is likely to stand the test of time. As my two year old watched the races with a "go Phelps" cheer, I wondered how many budding sportspersons he would inspire.
Even as I watched the closing ceremony with breathtaking awe, I wondered when was the last Olympics when I felt genuinely sad at the closing, and my mind had to go back to 1984 (when Mary Lou and Carl Lewis turned in the performances of a lifetime). I may have been bleary eyed in morning meetings, but I think it was all worth it- there is nothing like watching history being made live!
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