Clusterstock Market Chatter: October 9, 2008

We’re working on a new feature that for now we’re calling “Market Chatter.” (Lame, we know. But we’ll get there.)  We’ll be using it to cover live events.  We’ll also be using it to chatter about the market, CNBC, etc, all day–all the things that we and you do all day anyway.

If you’re smart and funny and not offensive, we’d love to have you on the Market Chatter panel. If you have something to say, please submit it in the window at the bottom, and we’ll review and add it to the conversation as soon as we can (we’re shorthanded right now, so thanks in advance for the patience). As soon as you demonstrate that you are civil and insightful, we’ll add you as a contributor. Then you’ll have your own media platform all day long!

Note: There are a few rules, a couple of which have been violated in this session (If we’re not approving your posts, it’s not because we hate you.  It’s probably because you’ve violated one or more, as reader “Jim J. Cramer” did earlier):

  • Don’t impersonate other people
  • Don’t swear needlessly
  • Write in English (basically)
  • Don’t slander, needlessly insult, etc.
  • Be intelligent

The experiment went great–and we learned a lot about how to make it even better.  We’ll be back with another tomorrow (or earlier, if something exciting happens. Thanks to all who participated.

Here’s the full string:

8:53 Henry Blodget:  Art Cashen (sp?) complaining that we haven’t had the violent panic moment that signals the bottom
8:54 Henry Blodget:  His bottom line: “Several very tough years ahead of us.”   He’s got that right
8:55 Henry Blodget:  Earlier, Jim Chanos did credible job of defending shortsellers, who are attacked in every downturn. Only silver lining of market crash post shortselling ban is that they can no longer be scapegoated. At least until ban lifted.
8:56 [Comment From J.Tang] 
From Markets Live on the FT, LIBOR information: *LIBOR-OIS SPREAD WIDENS 25 BASIS POINTS TO 346 BASIS POINTS *ONE-MONTH LIBOR FOR EURO 5.10% VS 5.19, BBA SAYS *THREE-MONTH LIBOR FOR EURO LITTLE CHANGED AT 5.39%, BBA *THREE-MONTH DOLLAR LIBOR 4.75% VERSUS 4.52%, BBA SAYS *THREE-MONTH STERLING LIBOR 6.28% VS 6.27%, BBA SAYS *OVERNIGHT LIBOR FOR EURO 3.94% VS 4.35%, BBA SAYS *ONE MONTH STERLING LIBOR 6.09% VS 6.08%, BBA SAYS *OVERNIGHT DOLLAR LIBOR 5.09% VERSUS 5.38%, BBA SAYS *OVERNIGHT STERLING LIBOR 5.42% VS 5.83%, BBA SAYS 8:57 Henry Blodget:  And then vigorous debate with bank lobbyist (?) making the ridiculous argument that the whole problem is mark-to-market accounting.   Talk about reaching for scapegoats.  
8:58 Henry Blodget:  Whole argument against mark-to-market: Banks know better than market what their assets are worth.   Please.   Violates every basic tenet of market theory.   Buffett STRONGLY pro mark-to-market: Publish at market and then explain why you think worth more. That’s what he does…
8:59 Henry Blodget:  Thanks, J. Tang.   So in other words credit still getting even tighter.
9:02 [Comment From Lara B] 
(Financial) Shorts are back in style today. 9:04 Henry Blodget:  Yes, we just formally welcomed them back:
9:13 John Carney:  How did Michelle score the travel gig? She’s been in Rome, Paris and now London.
9:14 Henry Blodget:  Seriously.   And looking so British
9:14 John Carney:  Seems like a great score. Becky Quick just gets to go to Omaha.
9:15 [Comment From Tim A.] 
Terrorism laws being used for non terror already happening: 9:15 [Comment From Tim A.] 
“With local governments also holding accounts worth tens of millions of pounds (dollars) in Icelandic banks, the British government has also used powers under terrorism laws to freeze Landsbanki’s assets until the status of the deposits is resolved.” 9:16 [Comment From Hatch] 
Schiller made a pretty strong argument that homeowners being underwater is an albatross on the neck of the economy. Specifically, he points to the “anchoring” effect of people being stuck in a home they cannot sell and therefore not even bothering to look. With all of the money being thrown at the markets right now, why are banks and federal entities not trying to address this aspect in a more overt and comprehensive fashion? 9:17 John Carney:  Oddly enough Hatch, that’s what McCain wants to do but he’s getting blasted. I’m working on a post for the site about this now. Here’s the WSJ editorial page’s take on it:
9:17 Henry Blodget:  Because cost is mind-boggling. But eventually they’ll have to. Because whole flaw with this supply-side bailout (give banks money to lend) is that banks have no one to lend to.
9:21 [Comment From Hatch] 
John – follow-up on McCain’s plan: I recall reading that it would only apply to people who put money down. One of the biggest hazards we face (in my view) is people with no money down loans because they have no stake in the house. Two points: 1. Is my understanding correct? 2. What’s your take on assisting 0-down homeowners? 9:24 [Comment From Tim A.] 
That’s part of it… the bigger problem really being that the public is maxed out and in debt more than ever before…Maybe congress and the fed can make a massive credit card payment for everyone! 9:24 Henry Blodget:  “National debt clock” runs out of digits:
9:26 [Comment From J.Tang] 
Crisis is starting to take out some of the weaker companies. Ferrochina looks like it just had a credit event: . I was under the impression that even with the newly increased debt ceiling, the Treasury/Fed doesn’t have have all that much space left to manoeuvre. 9:28 [Comment From Matt J] 
“But eventually they’ll have to.” I respectfully disagree. One doesn’t fix a bubble by re-inflating it. 9:28 [Comment From Hatch] 
We keep hearing about banks tanking, brokerage firms faltering, and insurance companies (possibly) going belly up. Turning to the future, are there financial companies that you think will emerge from this crisis in a strong position? If so, what factors lead you to believe they will be well positioned? 9:29 Henry Blodget:  @Matt…I don’t think they can afford to make consumers feel rich again. I just think there will eventually be some provision for resetting debt level, looser bankruptcy laws, etc
9:31 [Comment From Hatch] 
@ Matt J – I think there is a difference between re-inflating and slowing the pop. I believe that, at a minimum, homeowners who are underwater should be able to refinance their loan into a standard 30-year, fixed rate. Allowing loan writedowns would be nice, but I don’t see that as being a deal-beaker. 9:34 [Comment From J.Tang] 
Henry, do you know if changing the terms on underlying mortgages in an MBS counts as a credit event? 9:34 Henry Blodget:  Don’t know.
9:35 [Comment From Rob] 
J Tang – Sure does. 9:36 John Carney:  It’s an interesting question: what happens if they just pass a law saying, “No agreement shall be enforceable which would make the changing of credit terms under this act a trigger for payments of any sort.”

9:37 [Comment From Hatch] 
Henry – there does not seem to be much news linking news of the credit crisis and lag in consumer confience to retail impact. With “Black Friday” inching up, when should we expect to see these dots get connected? 9:37 John Carney:  We saw them do something similiar in the bailout law, which rendered contractual bars on bank acquisitions unenforceable.
9:38 John Carney:  Joe is working on an item on retail and consumers that should be up on the site soon.

9:48 Joe Weisenthal:
9:49 [Comment From J.Tang] 
@ John It would be a nightmare if they didn’t have some sort of clause like that. Its like equity and credit are in two different universes. Do you think the Lehman CDS has anything to do with it? 9:49 [Comment From Hatch] 
Do you guys laugh yourself silly every morning at having one of the most interesting jobs around? 9:49 John Carney:  Hatch, we enjoy our jobs. That’s for sure.
9:49 [Comment From Hatch] 
Turning away from immediate credit issues for just a moment. Is the development of an independent energy infrastructure really going to be the great public works project of the next 10 years (ala Eisenhower Interstate)? 9:50 Joe Weisenthal:  Yes.
9:50 John Carney:  Maybe Hatch, but it may also turn out to be the next housing bubble.
9:50 [Comment From Kevin Krueger] 
Just curious – What is the downside of making the central bankers of the world the lenders to all of these commercial entities who cannot get a credit line or find the cost of credit too high? Instead of dancing around the problem, get the central banks to be the lender to everyone – GE, auto dealers, etc. If the commercial banks have competition in their lending practices, they may loosen up their lending practices. 9:51 Henry Blodget:  Yes, I think that will be huge.   Should be an immediate announcement of the next administration (that and the rest of a $300 billion+ new New Deal)

9:51 Henry Blodget:  Hatch…adding you to the panel.   Your comments will now go live automatically.
9:52 Joe Weisenthal:  A lot of folks are hoping that the next Eisenhower Interstate is a refurbishing of the transportation infrastructure itself.
9:52 Henry Blodget:  [Private Message to Hatch] Your comments will now be published automatically. 9:52 John Carney:  It’s very possible that will happen. The downside is that without a profit motive, it’s very hard for a central banking bureucrat to evaluate which loans and business are worth the investment. On the other hand, the private market did a pretty terrible job of credit control also.
9:53 Joe Weisenthal:  Agreed. I’m not sure how government is equipt to honestly measure things like credit-worthiness and what they should charge, say, an auto dealer for a loan. But I suspect the government will increasingly play that role nonetheless.
9:55 Henry Blodget:  All right… temporarily detaching from CNBC umbilical cord. Please note if anything interesting happens
9:56 [Comment From Jim Cramer Jr.] 
Its fucked up that you chose to exclude me Henry. just because I don’t “fall in line” like the rest of you sheep does not meen that my views and comments are not valid. Im an active member since yor internet outsider board. Just cause i write poorly and say foul shit doesnt mean that I dont know my stuff about investing bro. Its called a personality. 9:57 Henry Blodget:  Note to Jim and everyone: We’re going to have a pretty tight anti-foul-language policy here.   We’d love to have you involved, but only let fly with the trash talk when you really have to
9:57 [Comment From John Russell] 
This is a great new feature I had been waiting for someone to add! Much better than constantly updating comment pages… 10:00 Henry Blodget:  Thanks, John. Agreed.   We’ll keep refining. It will probably be best for actual live events, but even this is fun.
10:00 [Comment From Hatch] 
The site has contained rumblings lately on a potential insurance failure (Hartford as #1 suspect). Insurance companies typically can invest their “floats” (portion of premiums received) to grow their capital and profits. I am sure they invested in the gargabe MBS like eveeryone else. Stories on Hartfors raise an interesting question: Why have we not seen more insurance companies announce financial trouble? Are they the next domino? 10:00 [Comment From Jim Cramer Jr.] 
Ok hahah im on! I’ll behave bro. 10:02 Joe Weisenthal:  That’s an interesting question, Hatch. I haven’t seen too much about where insurance companies are investing their float — in part I think it’s because the media does a terrible job of explaining how insurers make money.
10:03 [Comment From John Russell] 
MS stock diving again… 10:03 Henry Blodget:  Even after John Mack’s appeal to the troops:
10:04 Joe Weisenthal:  Yikes, they’re almost back down to their lows three weeks ago, when they hit 11
10:06 Henry Blodget:  Roubini sticking by his opinion that they’re toast:
10:06 [Comment From Hatch] 
They need to host a gathering at the Ritz to cheer everyone up. Works for AIG. 10:06 [Comment From Kevin Krueger] 
Thank you for saying that John. I feel like the government is taking the brunt of this crisis when there were several industries that propelled this crisis into its current form. Most people do not want the government to interfere with their lives, but they are somehow responsible for this mess now because they did not provide oversight or interfere. Now the govt. will be happy to oblige with their interference in the financial system. Given what they have done with their most recent interference, airport security, what will happen to our financial system? 10:06 [Comment From NJR] 
On re/insrance – I will go on record that they are not the next bubble given that most I’m familiar with – with the exception of AIG – have taken their write downs and while they were large in some – they simply were not as significant because they could not invest in many of these troubled assets and have them qualify as capital for solvency purposes. Insurers live and die with their RBC and solvency ratios. 10:06 [Comment From J.Tang] 
@ Hatch I dunno, it looks like Met has to raise capital, Hartford needed to raise capital, those are two big insurers. We might find out more in the next couple of days 10:08 Henry Blodget:  [Private Message to CoveritLive] Keith, thanks. It’s doing great on test run. We have lots of plans for it. Thanks for building… 10:08 [Comment From Phil Foster] 
I do prefer a little less personality. On the insurance issue, how much do you suppose is tied up in pention and other retirement moneys in these “ultra safe” insurers? 10:08 CoveritLive:  [Private Message to Henry Blodget] Glad you like. i’ll leave you to it and ping you later.  (Reply Privately) 10:08 Henry Blodget:  [Private Message to CoveritLive] Thanks 10:14 [Comment From Hatch] 
@ NJR and J.Tang – Once Insurance companies falter on these ratios and accept federal funds… how long until regulatory model shifts from state to federal? 10:14 [Comment From Tim] 
Anyone heard any chatter on BX? Been getting hit the last couple days. Would think with their lockups and ability to raise funds they’d be decently insulated 10:14 [Comment From Hatch] 
@ Phil – Great insight… did not even think of that. If pensions start to falter, then I imagine PBGC will be the next one dropping off IOUs from their “trust fund.” (assume they have one) 10:14 [Comment From J.Tang] 
I don’t know about insurers specifically, but pensions have taken it on the chin. Mass. Pension fund lost 4 billion last month. I think the only thing that worked was gold and t-bills. Maybe Campbells & Ammo. 10:14 [Comment From NJR] 
I’ll qualify and say it’s the reinsurers I follow and my comments don’t necessarily apply to the insurers . The reinsurers are not all immune but that’s the cycle anyway – consolidation, event, start up, consolidation/acquisition. This crisis is another darwinian event like a catastrophe…. 10:14 [Comment From NJR] 
Aslo if you look at AIG – their core lines – P&C are in good condition – the crisis can be almost solely attributable to Cassano’s London financial products group. I have no opinion on life business – not my industry. 10:14 Henry Blodget:  [Private Message to Hatch] Your comments will now be published automatically. 10:14 Henry Blodget:  [Private Message to J.Tang] Your comments will now be published automatically. 10:14 Henry Blodget:  [Private Message to NJR] Your comments will now be published automatically. 10:16 Henry Blodget:
10:16 NJR:  [Private Message to Henry Blodget] I really should be working.. And I’m only a P&C reinsurance expert! But thanks anyway and I will remain on topic and polite…  (Reply Privately) 10:16 J.Tang:  @ Hatch not so sure about insurance regulations, but I was under the impression that each state has its own subsidiary protected from the muck-ups of the parent company (I’m drawing all of this from what happened to AIG). 10:16 Henry Blodget:  [Private Message to NJR] Great to have you. Thanks for dropping in. 10:17 NJR:  Good question and Hatch but the states via the NAIC have always been the sole insurer regulators to date so that would be a precedent setting event for federal involvement 10:23 Joe Weisenthal:  Nouriel Roubini Halloween mask I’m sure it’ll be the second most popular one this year, after Sarah Palin.
10:23 NJR:  Insurance has always been so heavily regulated – and given (it’s a big one, I know) that said regulators are doing their jobs, I’d be surprised to see any huge fall-out of US insurers but I’ve been surprised a bit lately…. the “heavy burden” of regulation in the US for insurers may well turn out to be a good thing – while other domiciles have had huge competitive advantages in attracting insurance capital simply because of the lack of regulatory burden – and this has caused quite a bit of lobbying in Congress by Chubb, Hartford et al… the current crisis may justify the extant rules and requirements. 10:24 [Comment From MMM] 
Morning…Very cool addition! 10:24 NJR:  Especially the risk-based capital ratio requirements which caused so much consternation… 10:24 [Comment From Phil Foster] 
Excellent cartoon on 10:16 post. 10:24 [Comment From Hatch] 
Thanks J – do not know too much about insurance industry. Used to work in public accounting and observed a trend after each “disastrophesis”: More oversight at national level, more scrutiny by Feds, and less faith in “self-regulation”. recognise it could be seen as “apples to oranges” – just thinking aloud. Definitely first to admit that I am not all too knowledgable on insurance industry. 10:25 Henry Blodget:  [Private Message to Hatch] Hatch…for some reason your comments aren’t going live automatically. Some bug. Trying to fix, but just quick note to explain 10:25 [Comment From Mike] 
Wow, YHOO flirting with #13 today. Earnings are 10/21 and I’m yet to hear anything from management regarding outlook. A few months ago they were forecasting 25% growth for 2009 during their roadshow! Maybe it’s time for Jerry, Sue, &Blake to go back the bus & go on another roadshow? 10:26 NJR:  and don’t get me started – it’s the most boring topic out there unless you’re involved… always avoid gatherings of insurance men and (women…like me) 10:28 [Comment From Hatch] 
NJR – used to be a damn, dirty auditor… I am sure we could collectively cure insomnia and put ambien off the market :-) 10:29 J.Tang:  Really? The AIG insurance gatherings don’t sound too bad. 10:30 NJR:  Hatch not bad guess – that’s where I started but in London during the Lloyd’s debacle and Bermuda the insurance mecca… 10:31 NJR:  oh Hatch – thought you were talking about me…and you were, as it turns out 10:32 [Comment From Phil Foster] 
Are insurance companies not allowed mortgage backed securities in their pool, every safe haven boasted Freddie and Fannie stock? 10:32 J.Tang:  Pretty good article in the WSJ about California being a harbinger of things to come. Complements Joe’s earlier article nicely: (I think its free) 10:33 NJR:  The one’s I had as clients had siginficant investments in FNMA bonds and the like and – but anything considered a FAS 157 level 3 would not have been given weight for solvency purposes 10:36 [Comment From Phil Foster] 
Thanks NJR, but what is a FAS 157 level 3? 10:39 Henry Blodget:  OK, folks, this has been great–and we’ve already learned a ton about how to do it.   In the future, we’ll quickly be approving as many as 10 panelists who can drive the commentary, and we’ll focus on specific topics for specified periods of time (giving us all a chance to go to the bathroom occasionally).   We’ll leave this initial one open until 11AM ET, and then we’ll shut down the live chatter and post the whole conversation on the site (where it will remain in perpetuity).   Thanks again–great stuff.
10:39 NJR:  oh damn – short answer – here – I hear the terminology on squawk box so I thought it was more mainstream now but to save time 10:39 NJR: 10:41 [Comment From Foster] 
Thanks 10:43 Joe Weisenthal:
10:44 J.Tang:  Truly, a dark day for America. 10:44 Joe Weisenthal:  Yes.

10:46 [Comment From Hatch] 
The cliche “cash is king” is now working is way back into the lexicon of financial news sources. This has in turn led to articles touting investment in companies with cash reserves. What other traits are important to consider when evaluating bargains in the coming months/years? 10:46 [Comment From Hatch] 
I pray nanotechnology builds a violin small enough. 10:47 J.Tang:  I imagine low amounts of leverage might be an important factor. 10:49 J.Tang:  Or I guess if you think Roubini is right, you just want to buy a bomb shelter and canned foods 10:49 [Comment From Hatch] 
Very subjective trait, but I am taking note on which banks/brokerages are the ones coming to the rescue. Once the dust settles, they’ll be in good position. 10:51 J.Tang:  Probably, but wouldn’t bank debt be a better option right now? Mauboussin wrote something about this in “More then you Know” 10:54 J.Tang:  Wow , Sallie Mae is getting crushed (even more) 10:54 [Comment From Foster] 
Or absence of debt all together. 10:54 Henry Blodget:  [Private Message to Foster] Your comments will now be published automatically. 10:54 Joe Weisenthal:  Huh, Sallie Mae still exists. To be honest, there are some financials that I just assumed had gone bankrupt sometimes this summer.
10:55 [Comment From Foster] 
Some of the ones comming to the rescue appear to be moving on broken legs, Citi for example. I believe missing the bottom on this one will not be a grave mistake. 10:55 [Comment From Hatch] 
Can someone please explain why ING is getting crushed? 10:55 [Comment From Hatch] 
good point 10:56 J.Tang:  @ Hatch Ah here’s the quote from the book “Investors are wise to look around for survivors at the end of the pruning process because a portfolio of surviving companies often presents an opportunity for attractive shareholder returns.” 10:59 J.Tang:  Its a good read, I recommend picking it up. I hope the Lehman CDS auction goes over smoothly, its about the only thing I can see turning this sucker around right now 10:59 [Comment From Hatch] 
@ Foster – I think Citi is being too stubborn. I do not see them as a rescuer. 11:00 [Comment From Hatch] 
@ J. Tang – what book are you referring to? 11:01 J.Tang:  “The More You Know” by John Mauboussin 11:01 J.Tang:  errr Michael 11:02 [Comment From Hatch] 
Completely inappropriate – but is Dick Fuld the most unfortunate name ever? 11:03 J.Tang:  There is NH congressmen named Richard Sweat I believe 11:03 [Comment From Hatch] 
Thanks! 11:03 Joe Weisenthal:  It’s Swett. But still.
11:04 J.Tang:  ah so close 11:16 Hatch:  [Private Message to Henry Blodget] Henry – issue may be with how company internet access is arranged. Obviously can’t give specifics, but will just say that it causes technical difficulties all the time.  (Reply Privately) 11:16 Henry Blodget:  [Private Message to Hatch] Thanks. Makes sense because we can’t see any issue on our end. Sorry about that. 11:26 [Comment From anti jim cramer] 
jim cramer jr is hilarious. he’s like a mensurated skunkwhore who gets pissed at everything red 11:26 [Comment From Tim. A,] 
My friend’s urologist is Dr. Johnson…. (i’m serious)… 11:35 [Comment From LF 2.0] 
With the Dow heading closer and closer to 9,000, I’m surprised no one has looked before to see what happens when a Republican leaves office and a Democrat takes over. Take a look and you’ll see that this was going to happen the moment people felt like the Dem.s would take office. If it happens expect the market to recover by year end. If not, it’s going to be a long winter. (Fact; not fiction) 11:42 [Comment From @ LF 2.0] 
I think the market is really headed south once the usual Black Friday Retail Binge craters. Consumer confidence is dipping, credit is drying up, and it will be cold and bleek. We could a two-headed hydra of Bill Clinton and Ronald Raegan and it would not matter. 11:42 [Comment From Hatch] 
I just the @ LF2.0 name message – need more coffee :-) 12:04 [Comment From LF 2.0] 
We’re talking about confidence here; in the markets in the system in being able to get back in and make money like we’ve been able to do in the past – it can and will happen. History tells us that things get bad and they get better. People are doing the wrong thing by taking their money out of the market b/c it’s taking air out of the balloon. Hopefully the real deal makers go in and snatch up the deals and signal to people that bottom or not that there’s still money to make in these uncertain times. People buy shares, not dollars – so give me GE or IBM at $2 and I’ll gladly laugh to the bank. 12:43 [Comment From DonMartin] 
any idea why CS shares are trading down? 12:43 [Comment From Dan] 
I have noticed a lot recently that the SPY vs the actual S&P500 versus the 2x inverse ETF’s SSO and SDS are often not consistent at all. Right now I see SPY +.07% and the S&P down 0.96%. This impacts the 2x ETF;s quite a lot. Can anyone explain why? 1:39 [Comment From Hatch] 
@ LF2.0 – Not clear on the message here. If you’re saying that the drop is driven more by pessimism than fundamentals, I agree. However, I do not agree that all is well within 1 year’s time. 1:39 [Comment From Hatch] 
Dan – I cannot pinpoint an exact reason, but my guess is that nobody knows up from down right now. In essence, everyone is huddled together waiting to see what happens. I say give it time and you will start to see spread again. 1:39 [Comment From Tim A.] 
YAY! Dow down 100 points… Half Price Beer for Wall St. 1:39 Henry Blodget:  Thanks again, all.   We’ll be back tomorrow morning for opening bell.   (And this evening if anything exciting happens. 

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