Author Topic: Wall Street has worst day since 9/11  (Read 284 times)

Offline Mandie

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Wall Street has worst day since 9/11
« on: September 15, 2008, 11:29:49 pm »
http://money.cnn.com/2008/09/15/markets/markets_newyork2/index.htm?cnn=yes
NEW YORK (CNNMoney.com) -- Stocks tanked Monday, as investors reeled amid the fallout from the largest financial crisis in years after Lehman Brothers filed for the biggest bankruptcy in history and Bank of America said it would buy Merrill Lynch in a $50 billion deal.

Treasury prices rallied as investors sought the comparative safety of government debt, sending the corresponding yields lower. Oil prices tumbled, falling well below $100 a barrel on slowing global economic growth. The dollar rallied versus other major currencies and gold prices spiked.

The Dow Jones industrial average (INDU) lost 500 points, or 4.4%, according to early tallies. It was the biggest one-day point decline for the Dow since Sept. 17, 2001, when the market reopened for trading after having been closed in the aftermath of 9/11 terrorist attacks.

The Standard & Poor's 500 (SPX) index lost 4.5% and the Nasdaq composite (COMP) lost 3.6%.

Global markets tumbled as investors reeled after Lehman Brothers filed for bankruptcy, Merrill Lynch was forced to sell itself to Bank of America and investors awaited AIG's restructuring announcement.

Worries in the afternoon focused around Dow-component insurer AIG, which has been scrambling to raise enough cash to fend off ratings agency downgrades and stay afloat.

In the afternoon, N.Y. Gov. David Paterson said AIG will be allowed to use $20 billion in assets through its subsidiaries to stay afloat, basically providing itself with a bridge loan. AIG has also reportedly asked the Federal Reserve for a roughly $40 billion bridge loan over the weekend.

Meanwhile, Reuters reported that sources say talks with Warren Buffett's Berkshire Hathaway about investing in AIG have ended.

Shares of AIG (AIG, Fortune 500) were down 52%, near where they stood before the announcement.

Still, some analysts said that the stock selloff could have been worse, considering the depth of the problems.

"You have to throw out the history books because there's really nothing to compare this to," said Jim Dunigan, chief investment officer at PNC Advisors.

Art Hogan, chief market strategist for Jefferies & Co., said the magnitude of the financial industry fallout is unprecedented, and could only be compared to the Great Depression of the 1930s or the railroad bankruptcies of the 1800s.

"We've never witnessed this before," said Hogan. "There's no road map for this."

The developments for the three companies cemented for investors that the credit crisis is far from over, six months after the near-collapse and government rescue of Bear Stearns.

"The landscape has changed and a lot of the major players who were are no more, so of course people are panicked," said Stephen Leeb, president at Leeb Capital Management.

"But it's not the end of capitalism," he said. "This may usher in something worse than what we've seen in terms of the economy, but the companies left standing at the end of this will be OK."

Merrill Lynch's buyout was perhaps providing some reassurance to investors, said Dunigan, in that it shows there is still value in the market.

Losses were also tempered by the Federal Reserve's decisions to loosen up its lending restrictions. The central bank could end up cutting the fed funds rate, its key overnight bank lending rate, when it meets Tuesday, analysts said. The fed funds rate currently stands at 2.0%.

Also helping Tuesday: news that a group of 10 banks including Morgan Stanley, Goldman Sachs and Barclays had given up to $7 billion each to create a $70 billion lending pool to help smaller institutions.

Lehman bankruptcy: Lehman Brothers (LEH, Fortune 500) announced it was filing for bankruptcy, after weekend talks aimed at saving the 158-year old firm failed.

The filing came shortly after midnight Monday, after Bank of America and Barclays pulled out of negotiations to acquire Lehman, which has lost $60 billion in bad real estate bets and the credit market's collapse.

Unlike with Bear Stearns back in March, the government was reportedly not willing to help finance a takeover, bailout or restructuring of Lehman Brothers. This reportedly contributed to the reluctance of other firms to strike a deal with the troubled company.

Speaking in the afternoon, Treasury Secretary Henry Paulson said that he hasn't ruled out additional government bailouts for the future. He also said that the banking system is sound. (Full story).

Lehman shares plunged 94%. (Full story)

Merrill Lynch buyout: After pulling out of the Lehman negotiations, Bank of America (BAC, Fortune 500) announced that it will buy Merrill Lynch (MER, Fortune 500) for $50 billion in stock. The price values the company at more than $29 a share, a more than 70% premium from Merrill's closing price on Friday of $17.05.

The company has posted losses of more than $17 billion over the last four quarters and saw its stock plunge 27% last week.

Shares gained 14% Monday afternoon, while Bank of America tumbled 20%. A variety of other financial shares plunged, including Washington Mutual (WM, Fortune 500), Citigroup (C, Fortune 500), Morgan Stanley (MS, Fortune 500), Goldman Sachs (GS, Fortune 500) and JP Morgan Chase (JPM, Fortune 500).

AIG: Insurer AIG (AIG, Fortune 500) plunged 55% as Wall Street awaited the details of its restructuring plan, expected to be announced Monday.

The company has lost more than $18 billion in the wake of the subprime mortgage crisis and is in desperate need of cash to maintain its credit ratings and investor faith.

Should the company fail to raise cash and see its credit rating cut by the ratings agencies, it may have only two to three days to survive, according to a source close to the firm. (Full story).

AIG stock fell 50%.

Market breadth was negative, with losers beating winners by almost 7 to 1 on volume of 1 billion shares. On the Nasdaq, decliners topped advancers by over three to one on volume of 1.81 billion shares.

10-bank emergency fund: In a bid to calm the markets, the Federal Reserve announced plans Sunday to loosen its lending restrictions to the banking industry. A consortium of 10 leading domestic and foreign banks, including Goldman Sachs (GS, Fortune 500), Citigroup (C, Fortune 500), Barclays (BCS) and Morgan Stanley (MS, Fortune 500), agreed to create a $70 billion fund to lend to troubled financial firms.

The Federal Reserve, meeting Tuesday, could cut the fed funds rate, a key short-term interest rate, from the current level of 2%, analysts said.

Oil: Oil prices plunged as investors continued to bet on a global economic slowdown. Additionally, early reports showed Hurricane Ike didn't do as much damage to oil rigs and refineries in the Texas Gulf region as expected.

Oil prices were down $5.50 a barrel to $95.68. Oil dipped below $100 a barrel on Friday for the first time in five months.

Other markets: In global trade, European and Asian stocks ended lower. Many major Asian markets, including Tokyo and Hong Kong, were closed for holidays.

Treasury prices soared as investors poured money into the relatively safe-haven. The rally sent the benchmark 10-year note tumbling to 3.52% from 3.72% late Friday.

In currency trading, the dollar rallied versus the yen and euro.

COMEX gold for December delivery gained $19.20 to $783.70 an ounce


Few years back, I said the housing market in the US was in a bubble, and it was going to break. Everyone said I was nuts. There is no way a house over doubles in price in 2 years and this is normal. Or vacant land goes from being worth 5k to 85k. No fucking way!!! Especially in rural areas that only went up a percentage or two a year for decades. And housing bubble for me spelled disaster, because the only other US housing bubble on record was before the great depression, which in part contributed to the great depression itself (stock market failure/crash.) I said, the US is on the verge of meltdown, and nobody listened.

The US is in trouble. Big bad trouble. And don't think for a second this won't affect the rest of the world. It will. Just like the housing market crash, even high end investors and business are feeling the brunt of economic destruction. We haven't seen anything yet, especially if North American gas prices don't get out of retardedville. North America is a huge place, it's not like Europe where everything is bunched together. Everything here is spread apart, making our commutes and drives very long.

Real estate aside, transport is through the roof. Prices of things are going up. And we haven't even begun to see all the foreclosures and bankruptcies yet. The automotive industry is on the verge of collapse. Jobs are going to be lost. Lots of them. And this war. And the hurricanes. And the insurance companies (home owners and medical.)

The US is fucked unless by some miracle shit doesn't turn around and fast. The US feeds off of the rest of the world. We get everything from other countries. This will change. This will hurt other countries.

I'm frankly sick to my stomach that Hillary Clinton didn't get the ticket. I think she would have won, and I think the Clinton family could fix the fiasco that is the US. That leaves Obama or McCain, nether of which get me excited. I see major potential for both to fudge things up even worse than they are, but if I were to pick, especially with McCain a 5th heart attack away from the grave and that nutter Palin hovering over a Presidential Chair (ARE YOU FUCKING KIDDING ME PEOPLE??? THE MOST POWERFUL LEADER OF THE WORLD COULD BE THAT IDIOT?????) I guess I will support Obama. He makes me nervous, but he is the best option. If McCain does get office, as Tim mentioned, Hillary Clinton would be a shoo in in 4 years. Then again, the US voted for Bush, twice. Twice!

I'm so disgusted.

Offline Mandie

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Re: Wall Street has worst day since 9/11
« Reply #1 on: September 17, 2008, 03:55:57 am »
And we have more!


Fed takes over AIG with $85 billion loan

Fed in AIG rescue - $85B loan
Federal officials will take 80% stake in the nation's largest insurer in an $85 billion rescue plan to prevent financial chaos worldwide.


http://money.cnn.com/2008/09/16/news/companies/AIG/index.htm?cnn=yes

Offline Thin

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Re: Wall Street has worst day since 9/11
« Reply #2 on: September 17, 2008, 06:35:24 am »
My housemate is a banker, and he's been predicting doom and gloom all year. I would be interested to see what MoP says, too.

We are very aware that at the moment the American consumer is driving the world and what this financial crisis could mean for the rest of us. We wont copt it as bad as you guys, but things definitely aren't looking great.

Noticeably, I'm not sure if either the Obama or McCain campaigns have had much to say on this issue... which concerns me, because onestly I dont see a way around it. Your economy is going to get fucked no matter who leads.

Offline Devlyn, the special edition

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Re: Wall Street has worst day since 9/11
« Reply #3 on: September 19, 2008, 08:06:42 am »
"going to get fucked"?

If you ask me it is already fucked :P. I guess the market was a bit too free?
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Offline Julius

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Re: Wall Street has worst day since 9/11
« Reply #4 on: September 19, 2008, 09:22:41 am »
I like how they're comparing it to the Great Depression... despite the fact that it doesn't have anywhere near the same ramifications for the general populace. I haven't heard of unemployment over 20% in the US or 30% in Australia (hah), yet...

Mind you, it is just the start, I guess.
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Offline Auryn

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Re: Wall Street has worst day since 9/11
« Reply #5 on: September 19, 2008, 10:07:22 am »
Duh, tell me about the rabbits again, George!
Gimme the good old days when a pair of
boobs were a couple of dumb guys.

Offline Thin

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Re: Wall Street has worst day since 9/11
« Reply #6 on: September 26, 2008, 05:04:04 am »
If I bankriupt myself will the American taxpayer give me 800 billion?

Offline Julius

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Re: Wall Street has worst day since 9/11
« Reply #7 on: September 26, 2008, 08:32:18 am »
I'll give you 900 billion, Thin. I promise.
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Offline The new Olli (with hair)

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Re: Wall Street has worst day since 9/11
« Reply #8 on: September 26, 2008, 03:39:15 pm »
I vote let the banks sink.  Maybe, next time they won't be in such a rush to give enormous interest only mortgages to people working 3 part time jobs. What do you mean you can't pay your mortgage??                   
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Offline Kat

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Re: Wall Street has worst day since 9/11
« Reply #9 on: September 27, 2008, 04:08:49 pm »
As I understand it, it really would have been catastrophic to let AIG go under.  Those guys insure mutual funds which means that the safest investment in everyone's personal dossier would have gone from secure to vulnerable.  AIG's downfall would have meant bigtime problems for Main Street as well as Wall Street.

I dunno so much about the other banks, but keep in mind that the majority of people affected by this crisis were not corrupt CEOs making millions off risky ventures.  They were middle level employees now jobless and with a skillset that will be useless for the foreseeable future.

I'm tired of listening to people on the radio talk like they want to lynch every dude in a business suit.  I'm not denying that greed was involved, but the ones who suffer most are the ones who had the least control.
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