DOW

[gostgost]

The DOW in down over 300 points and Citi stock is doing 19.4800 I think we'll all be lucky and i mean lucky to make it through the day.

Oh boy.

[Spartan]

This is crazy, I'm so glad I rolled all my investments in to a low risk fund at the start of 08'.

[Tampa1257]

I have been saying for over a year now that the DOW should be around 7900-8200 MAX.

That represents the REAL and Actual Value of the market. The DOW needs to drop about 3,000 more points during this adjustment period.

[android]

» The DOW in down over 300 points and Citi stock is doing 19.4800 I think

» we'll all be lucky and i mean lucky to make it through the day.

»

» Oh boy.

Hang on for the wild ride!!!!

[zuma]

» The DOW in down over 300 points and Citi stock is doing 19.4800 I think

» we'll all be lucky and i mean lucky to make it through the day.

Don't worry mate... it'll be a roller coaster ride for a few days... until AIG folds, and then another roller coaster ride... anyway, it is just a correction...

Well, that only if "the invisible hand" that naturally regulates the market has not been completely severed.

[pnutbutrsangwich]

» I have been saying for over a year now that the DOW should be around

» 7900-8200 MAX.

»

» That represents the REAL and Actual Value of the market. The DOW needs to

» drop about 3,000 more points during this adjustment period.

I'd take the short side of that trade...

[gostgost]

I'm not so sure mate, Citi is down to 15.35 if we lose Citi I think that will be the game.

[pnutbutrsangwich]

» I'm not so sure mate, Citi is down to 15.35 if we lose Citi I think that

» will be the game.

You're talking about trading on a historically bad day for investment banks. Give it some time.

[tigger]

» I'm not so sure mate, Citi is down to 15.35 if we lose Citi I think that

» will be the game.

I can't see that being allowed to happen. WaMu yes, but Citi, BAC and the like? It would astonish me if they weren't bailed out if need be.

It's a damned shame that Wall Street and the banks weren't rational about housing and derivatives. The heap of regulation that's coming down on their heads could have been avoided.

[gostgost]

Look at Lehman this company has been around for 168 years much longer Citi and BAC and poof gone. Dow closes at -504 first time since Sept 11, 2001.

A friend that works for Citi has told me that everyone at Citi are walking on pins and needles, they shutting lights off during the day, cutting back on the cleaning, closing the kitchens and cafes he's telling its unbelievable. I'd be scared if I worked there.

I only pray that you all are right.

[cvm4]

DOW is down 25% from the highs of '07. That's a bear market if I've ever seen one. There's really too many people involved in this mess to call out one company or thing that did it.

[El Presidente]

I think it was midnight Sunday your time when the news on Lehman hit here.

Once we see a shake up of the the rest of the pure investment banks, then the Insurance companies, then the local councils and governments who bought the CDO's, + the bailout of Detroit Auto.......then we will be OK

[cvm4]

The scary thought is that if the socialist handouts don't quit. A business fails and we bail them out. :-|

[kilroy]

» The scary thought is that if the socialist handouts don't quit. A business fails and we bail them out.

Why not?! We already bail out EVERYONE who decides they want to live on a coast prone to hurricanes and get their asses handed to them every few years.... why not businesses as well?

My fiancee works for an insurance company that is a subsidiary of AIG. They had a meeting today where they were told that while AIG was having a couple of 'liquidity problems...' HAHAHAHA... that their company was fine and doing well... since all they do is insurance... and not taking profits and investing them in crappy loans etc...

... so we got that going for us... which is nice.

[Ken Gargett]

this was an article this morning on the business spectator site re the lehmann debacle - www.businessspectator.com.au. good site for aussies at least with lots of updates about what is happening in the economy, markets etc.

what REALLY needs to happen is that regulators/authorities and so on in ALL countries must get stuck into the big companies with failings and nail the top brass wherever there is any evidence of dishonesty, fraud, mis-reporting etc. easier said than done but it might at least make them think twice in future. what i found astonishing about this article is that not that creditors might try and claw back the bonuses, but that they were paid in the first place. anyone responsible for paying bonuses in those conditions should be jailed.

Last week Lehman Brothers reported stockholders’ equity of $19.45 billion against assets of $600 billion, and a book value per common share of $27.29.

Last sale on Friday was 18c, down from $3.65 the day before – when the earnings results came out with that book value. The price had fallen from $67.73 over the past 12 months.

In other words, the equity and the book value were fictions, which is why the assets will now have to be sold.

If the assets are sold for 3.2 per cent less than book value, the equity will be wiped out.

But the truly remarkable thing is that on August 31 last year, when the bankruptcy of Lehman Brothers was unthinkable, stockholders' equity was reported as $21.7 billion against assets of $659.2 billion.

In other words, Lehman’s gearing ratio a year ago – when everything was apparently fine – was exactly the same as it is now: 3.2 per cent of equity.

And if you include off-balance sheet derivatives contracts the equity buffer is much skinnier. Last week’s filing did not disclose derivatives exposures, but the 2007 annual report showed total off-balance sheet derivatives commitments of $737.9 million.

What are they now? And what are they worth?

Anyway, the equity has gone. The question now is whether bondholders will get anything back, and whether those with whom the firm trades – customers and counterparties – will lose their money as well.

Total long-term capital in last week’s accounts was put at $143 billion, which implies subordinated notes and bonds of about $124 billion.

It means the value of the assets would have to decline by 24 per cent before all capital is wiped out and the money of customers and counterparties is put at risk. The nature of the assets was not disclosed in last week’s filing, but there is a lot of credit derivatives and commercial real estate that will now have to be sold.

Management, as well as the PricewaterhouseCoopers partner who seems to be in charge in the UK, Tony Lomas, are saying that there will be no firesale, and that they will take their time selling assets, but as Centro in Australia has shown – you take as long as you like – the assets are only worth what they are worth.

An interesting thing about Lehman’s quarterly results last week was that its other activities – apart from principal trading – are still quite profitable.

The firm made $611 million in the quarter from investment banking (by which I presume is meant M&A and capital markets advisory), commissions earned $569 million and investment management $432 million. That’s a $6 billion a year revenue business right there.

The problem is that principal transactions lost $5.7 billion in the quarter because the book had to be marked to market. And with $2 billion in salaries going out the door for 26,000 employees, the loss was too great.

Last night our time, many of those employees were leaving the flash Lehman Brothers building carrying cardboard boxes and glum expressions.

The final indignity for them might be that creditors claw back last year’s $5.7 billion in bonuses. That’s right – Lehman paid an average of $US219,000 in bonuses to the staff in 2007, although of course they were massively towards to top, starting with CEO **** Fuld.

Total compensation at Lehman in 2007 was $9.5 billion, up from $8.5 billion in 2006. Sixty per cent of it was paid in bonuses.

There is now some talk that creditors might be able claim they were “fraudulent transfers”, made while the company was effectively insolvent. The question of whether it was insolvent at the time would have to be determined by a valuation of its assets then, and would only be triggered by a claim by at least one creditor.

But there are likely to be a lot of angry creditors of Lehman.