Join us, as we liveblog this morning’s early action. Let us know your take on things, or stories you find interesting.
00 Joe Weisenthal: Good morning
8:01 Joe Weisenthal: Reading through Staples earnings http://biz.yahoo.com/bw/081202/20081202005744.html?.v=1
8:06 Joe Weisenthal: Awesome, Santelli’s getting into a fight with a guy that’s bashing mark-to-market.
8:07 John Carney: Good morning Joe.
8:09 John Carney: I’ve been thinking about yesterday’s official declaration of a recession. Do you know if it triggers anything now that it’s official? I’m think of the way CPI can trigger cost of living adjustments. Does the official status of the recession have some sort of similar threshold effect, or is it purely academic?
8:09 Joe Weisenthal: yeah, not sure. I think it’s just words
8:12 Joe Weisenthal: Reading through Hank Greenberg’s WSJ op-ed. Basic argument: AIG needs an even sweeter deal http://online.wsj.com/article/SB122818179608971063.html
8:13 John Carney: Yeah. That is shocking. This has gone from a managed unwinding of AIG to “what’s good for shareholders.”
8:13 John Carney: Can’t blame Hank Greenberg for thinking that way, of course. He’s a huge shareholder. He has a lot of money on the line.
8:14 Joe Weisenthal: yeah, totally
8:19 Joe Weisenthal: Delta cutting capacity 6-8% per CNBC flash. That’s good. Aviation needs to contract
8:21 John Carney: This guy on CNBC now, Leonsis, just reminded us that “Washington is becoming the Capital of the economy.” Just in case anyone needs a reminder, that’s not a very good thing for the prospects of free markets or prosperity.
8:22 Joe Weisenthal: Yeah, heard that. Depressing
8:24 John Carney: As predicted, GE is using this morning’s conference call to talk down expectations.
8:24 John Carney: But they are affirming on dividend, which is perhaps an upside surprise.
8:28 Joe Weisenthal: Post on Hank Greenberg’s WSJ op-ed http://clusterstock.alleyinsider.com/2008/12/hank-greenberg-aig-aig-needs-an-even-sweeter-deal
8:29 Joe Weisenthal: BTW readers. Feel free to enter your thoughts down below.
8:30 [Comment From John Wilson]
GE sells paper to Fed gets FDIC backing on Bonds and will pay a dividend? i want to puke 8:30 Joe Weisenthal: Here’s GE’s announcement http://biz.yahoo.com/bw/081202/20081202005833.html?.v=1
8:32 John Carney: And, from what I can tell from the release (and what David Faber just said) their cost of capital has been going down. Do I have that right?
8:34 Joe Weisenthal: The lawyer for the family of the Wal-Mart employee seems to be making lawsuit noises. Wal-mart will be stupid to fight this case, rather than just pay out a fat settlement http://www.google.com/hostednews/ap/article/ALeqM5iDXtETwP7G17BQsO07DecwxuziLgD94Q89OGA
8:36 John Carney: I’m listening to the GE Capital call now. Will post updates here.
8:37 [Comment From WA]
Comment from a Wal-Mart employee: “Wal-mart sold a billion dollars worth of flat screen television… and only 1 person had to die for that.” 8:38 Joe Weisenthal: What’s your role at Wal-Mart?
8:38 Joe Weisenthal: Oh, nm. I take it you were quoting a WM employee
8:40 [Comment From WA]
My friend works in some corporate stuff 8:45 Joe Weisenthal: Ah, gotcha
8:46 Joe Weisenthal: This guy Sen. Corker on CNBC seems solid. He’s the one that defeated Harold Ford jr.
8:47 John Carney: GE Capital is participating in the Fed’s commercial paper liquidity program and the TLGP program. It’s not taking TARP money, however.
8:47 John Carney: The TLGP is what allows GE Cap to borrow money under FDIC guaranteed bonds.
8:49 John Carney: So, in short, it is borrowing money in shorter and longer term debt markets with government backing. This should attract borrowers who traditionally only invest in GSE and Treasuries. In other words, GE Cap borrows like a GSE now.
8:49 John Carney: How did that kind of capital markets discipline work out for the GSEs?
8:49 [Comment From John Wilson]
what a relief only TWO Bailout Programs for GE not 3 8:49 Joe Weisenthal: Yeah, really. This whole thing about giving every company the ability to borrow as though they were the federal government doesn’t seem real smart in the long run.
8:50 Joe Weisenthal: As with all these things: What’s the endgame. How does the government pull its support.
8:51 [Comment From John Wilson]
The unintended effects of all these BAILOUTS will be a Civil War 8:51 Joe Weisenthal: Yeah, let’s hope not.
8:52 John Carney: You could say that the government could pull out if GE Cap lowered its leverage ratio down to a less risky position. But I have two thoughts about that. First, there’s no way leverage can ever be low enough to be the same risk as full faith and credit as the US. Second, why would GE Cap ever lower its leverage ratio that far if it meant the loss of the government support. In short, the supply of TLGP guarantee creates its own demand.
8:53 [Comment From JCF]
Lots of talk about fighting off deflation being such a bad idea in context of asset bubble. But Ben and Paulson either dont care or are we missing something? 8:53 [Comment From WA]
there must be a reason why all those gunmakers ar doing better than the s&p 9:00 [Comment From John Wilson]
also – ALL GOV”T employees that work on the BAILOUTS should not be allowed to work on Shill St. for at least 5 years including PAULSON 9:00 [Comment From John Wilson]
why not enough talk of a DOLLAR BUBBLE? any other country would have had to devalue or default by now 9:00 [Comment From seh]
sort of a prisoner’s dilemma problem imho… imagine you can stockpile either guns or food. you can’t eat guns but if you have a gun you can take food from anyone without a gun. nash will be everyone owning a gun and no one owning food. 9:00 [Comment From WA]
I find all this talk about stag-deflation overhyped. I mean the term stagflation was created to signify an unprecedented scenario of high inflation and low gdp — ie monetary policy couldnt be too effective. But why is “stag-deflation” so unnatural — should we be expecting low prices/reduced prices in a period of economic slump? 9:00 [Comment From JCF]
I have heard that fertiliser shipments have severly disrupted due to limited to no access to LCs. As you may know these shipments are timed for limted stock piling. If true the next crop of various global soft commodities will be very low yielding which could give rise to protectionism and civil unrest. Any insight? 9:00 Joe Weisenthal: Here’s a bizarre one: Merrill Lynch has blocked CNBC.com from corporate computers http://clusterstock.alleyinsider.com/2008/12/merrill-lynch-mer-blocking-cnbc-com-on-company-computers-screenshot-
9:01 [Comment From Lew]
CNBC are a bunch of cheerleaders, not reobjective reporters.IMO 9:01 Joe Weisenthal: That may be. Still an odd reason to block their website
9:04 [Comment From Lew]
I want a network that delivers the good bad and ugly. They have been riding this decline all the way down and each downturn “this is capitulation”…what a bunch of crap..i feel for the novice who follow their advive for investing 9:06 Joe Weisenthal: Talking GE on CNBC. Something’s definitely gotta give on that yield.
9:06 [Comment From Lew]
Kudos to Clusterstock for your articles..if anything i would like to see the older article removed quicker 9:08 [Comment From BrianVan]
Hey guys… just a quick question, I know you’re not Cramer or anything, but maybe you can help. I invested about $500k in Bear Stearns about 2 years ago. I know the market’s been in trouble lately but I don’t jump on bad news, so I haven’t rushed to my broker yet. Wanted to know if I should hold onto it or sell it for something else. Thanks! 9:08 [Comment From Lew]
who would want to touch this market even at this level, if so here are my 5 picks,,,PFE, MCD, MO, IBM, MSFT..whats are yours? 9:11 Joe Weisenthal: Thank Brian. I’m not sure there’s much we can do for you, sadly.
9:13 [Comment From Lew]
hey BrianVan, i am no pro, but why have you waited this long? 9:13 [Comment From Lew]
i think you got 10 bucks a share 9:13 Joe Weisenthal: Lew, I’m pretty sure he was joking.
9:14 [Comment From Lew]
thanks Joe 9:14 [Comment From Foster]
I hit the wrong box. Ohio Gov. Strickland says economy contracting at 8 times the rate of this summer. 9:14 [Comment From WA]
psssh… those are such riskless bets. Mine are MS, AIG, FNM, FRE & C. and well, this tiny insurer, tchc 9:14 [Comment From James]
I don’t enjoy giving money to the banks….have you overheard if it would be plausible to nationalize these banks more like FDR did then we currently are filling black holes? Is it considered not un-doable or something? 9:14 [Comment From pdmoney]
whats the over under in days on SHLD bankruptcy? 9:14 [Comment From BrianVan]
on a more serious note (sorry, Lew), what do you think of the Fuld piece in NYMag? As a former Brother, I thought it was fair… and still entirely unflattering. Also, I like how Joe Gregory had to be fashion corrected BEFORE he wore that terrible jacket. 9:15 [Comment From Lew]
in that case i wish he did get hammered.lol 9:15 Joe Weisenthal: BTW: Very interesting blog post here on OPEC’s claim that $75 is a fair price for oil http://energyoutlook.blogspot.com/2008/12/right-price.html
9:15 [Comment From Dude]
Hi, guys. What are your views on TIF? Has the stock price reflected its sour prospect? or not yet? 9:15 Joe Weisenthal: Ask John about TIF. He’s our resident TIF expert.
9:16 John Carney: On NY Mag, I think that there’s a lot that sounds like lawsuit fodder in that article. It really makes it seem like Lehman realised it was in much worse shape than it was saying publicly. That’s definitely ripe for a shareholder suit if not an indictment.
9:16 [Comment From Dude]
Thanks. Any comments, John? 9:17 [Comment From Hatch]
Regarding retail sales – we keep hearing early numbers that it was better than last year. It’s at this point that it’s important to differentiate between sales and profit. Do you have any sense of how profitable BF was for retailers? 9:18 Joe Weisenthal: Good question Hatch. I’d been wondering the same thing. If the discounts were really as big as claimed, those sales probably won’t amount to much profit-wise.
9:18 [Comment From Lew]
i pulled everything out of equities 2 yrs ago, 200K-and opened up 3 safe deposit boxes-it may not be bright but its been safe 9:19 John Carney: On TIF: I try to avoid giving actual price targets or commenting on the prices of individual stocks because I simply find it impossible to know the level at which investors will value future earnigns or discount for risk. That said, their expectations are now much more realistic than what they were saying last quarter. It seems they’ve now owned up to the global economic slowdown and so hopefully shareholders have also wised up.
9:19 [Comment From Lew]
and i didnt lose 75% which i would have 9:19 [Comment From adrian]
Quick question: Beazer Homes (BZH) has market cap of 59mil. It just reported loss of 474mil. How is that possible? 9:20 Joe Weisenthal: Adrian. Why isn’t that possible? A company can lose tons of money, and still be worth SOMETHING, if only on the belief that it will earn money in the future.
9:20 [Comment From Lew]
Joe-why is the board slow–editing 9:20 [Comment From WA]
I wonder if there is a concept of LIFO liquidation in retailing. 9:21 [Comment From Dude]
thanks John. 9:21 John Carney: No problem.
9:22 [Comment From Lew]
with this recession, yeah we can finanlly call a duck a duck–that you can turn off the market all day and turn at 3-4 and that where the action happens 9:22 John Carney: Here’s my summary of the still ongoing GE Cap call:
9:23 [Comment From Lew]
pelosi to announce 500 billion stim–new news? 9:24 John Carney: That number is new to me.
9:25 John Carney: Does anyone else get the feeling that the amounts of these “stimulus/recovery” packages are not related to actual economics and just, well, arbitrary.
9:25 [Comment From adrian]
thanks, still not sure it really makes sense to lose 8 times what you are worth. 9:25 [Comment From Lew]
http://news.yahoo.com/s/nm/20081201/us_nm/us_usa_economy_stimulus 9:25 John Carney: Oh, thanks for the link Lew.
9:25 [Comment From WA]
I see nothing like that on bloomberg 9:25 [Comment From CU Writer]
Yeah John, I think they just pull these figures out of thin air. 9:25 [Comment From Lew]
John, i do 9:27 John Carney: Speaking of which, does anyone know if a new bidder for Lehman’s Neuberger ever came through. There was lots of speculation that Carlyle would put in a bid. And yesterday the judge in the bankruptcy case extended the bid deadline from noon to 7 pm. So far I haven’t found any evidence that a new bidder came forward.
9:27 Joe Weisenthal: Jefferies cans 17% of its workforce http://clusterstock.alleyinsider.com/2008/12/jefferies-cans-17-of-its-workforce-bankers-hit-hard
9:27 [Comment From Hatch]
The idea of giving a stimulus is great and all, but can we really afford it right now? Whatever happened to letting natural and sometimes necessary contraction happen? 9:27 [Comment From Lara]
JohnC: I think the numbers linked to the rescue packages are just as arbitrary and unrelated to reality. 9:28 [Comment From Lew]
John-were gonna pay for these packages somewhere down the road,,this is insane,,roll the pressess 9:28 [Comment From RuthlessGravity]
Are people smoking crack today? I’ve not seen one piece of news that has a glimmer of positive in it and the indexes are expected to open up 9:28 [Comment From CU Writer]
Now I doubt there is much the Fed can do about it, but it seems to me that the real credit problem out there, at least from the consumer spending side, is not that the banks don’t have the capital to lend or even that the consumer is destroyed with debt and is no longer credit worthy, but that there is simply no demand. In my line of work, I deal with the most conservative financial institutions out there (credit unions) and they have said for MONTHS that the biggest problem they have is finding someone who wants a loan aside from a car loan. Regular joes are paying off their credit card debts because they know they can’t rely on HELOCs for extra cash and are hesitant to take out new loans. There’s not much we can do about that, in terms of policy, is there? 9:28 Joe Weisenthal: Ruthless, eventually bad news can’t hurt the market any more. Not saying were there, just eventually.
9:28 [Comment From Lew]
I call for a 300 pt drop djia today 9:30 [Comment From James]
adrian….think about this….lets say “C” has property and operations around the world, client relationships in mass, ext. how come the company can be worth only $30 billion…..because the possible losses involve trillions in various loans….beezer is taking losses on the their assets in greater amounts then someone would be willing to hold the common stock for 9:30 John Carney: Question period has begun on this now hour long GE Cap call. Bob Corniel at Bar Cap gets the first question: asks about factors going into shrinking the company.
9:30 [Comment From Hatch]
Turning to the future for a moment… has anyone stopped to realise how much further we’re plunging into the “too big to fail” hole? Bank of America, Wells Fargo, and Citi (if they survive) are gobbling up just about every conceivable loan/account on the market. 9:30 [Comment From Hatch]
@ CU Writer – Good insight. I don’t think the average consumer is going to do anything to jumpstart the economy until uncertainty over housing is addressed. 9:32 [Comment From RuthlessGravity]
@Hatch I was thinking about that this morning in the shower. We have reinforced the too big too fail strategy. There is now an incentive to get bigger and more tied to the overall health of the financial system than Lehman was. This is going to blow up in our faces 9:33 John Carney: Interesting that the poll is revealing a prediction of volatility. Both up 200 and down 200 have more votes than moderate price movements.
9:33 [Comment From CU Writer]
Honestly, I don’t think the housing bit will change anything. Because yeah the prices will eventually stop falling but so many people will be unable to tap that line of credit for YEARS and Americans have woken up to that fact. We’re going to spend what we can afford now, plus a little fudging with credit cards and what we expect we can pay back with future earnings. I think it’s a long-term shift unless there’s a huge bounce in home prices which we know will never happen. 9:33 Joe Weisenthal: Yeah, the only think shocking these days is a flat day.
9:36 [Comment From Hatch]
Watching the stock market…. it’s like watching the seven stages of dying. In this case, it’s the 7 stages of coping with sub-8000 DJIA. Everytime the market dips below 8000, it seems like the market has some unwarranted bounce. What gives? 9:36 [Comment From WA]
only 11 people have voted Joe — there’s still hope 9:39 [Comment From CU Writer]
So anyone with any bright ideas to spur the demand side of lending, aside from magically fixing the housing correction which is never going to happen? 9:42 [Comment From WA]
yea, make the govt. borrow and spend — no one else is capable of doing that. 9:43 [Comment From Neil Visnapuu]
make it easier for people to go bankrupt – that’d probably spur the demand side 9:44 [Comment From Hatch]
@ CU – magically fix…no. However, I think mitigation can happen. To me, the greatest blocking factor is the remaining “time-bomb” loans (e.g. interest only, ARM, option, etc). If these loans can be reworked into conventional loans for people who can afford the payments, then I think people will be more willing to spend. If someone’s loan will explode in 2-4 years, then they’re going to be hesitant. Remove that hesitancy and people will wake up a little. 9:44 Joe Weisenthal: Interesting. The Pennsylvania pension system lost a lot of money on a strategy called “portable Alpha”. How did that go wrong http://online.wsj.com/article/SB122809294013867881.html?mod=googlenews_wsj
9:44 John Carney: The problem with these short term stimulus plans is that we’re basically hurting future consumption for present consumption, disrupting savings plans by telegraphing future inflation and taxes and don’t really allow for sustained growth because you can’t plan for the stimulus.
9:45 [Comment From Scott]
Nothing can spur it. The savings rate is too low. The consumer savings rate must go up first. Making it easier to file bankruptcy would help. 9:45 [Comment From GlassHammer]
I hope we get all the details about the big threes latest trip to DC. 9:45 [Comment From Hatch]
@ Scott – I also think making bankruptcy easier would help. Savings rates must improve 9:46 [Comment From James]
CU….what about a lotto type thing……20K you borrow and spend you get entered into a contest to $1,000,000 DOLLARS!!!! 9:47 [Comment From Hatch]
This whole “roadmap” thing is just a show with Big 3. If you just check donation numbers of Big 3 to congress, then you know where things are going 9:47 [Comment From CU Writer]
Hell, why not just give 500 Americans a billion dollars each or 5,000 Americans a million dollars each? I bet they could create more jobs and pump more money into the private sector than government spending that money. 9:47 [Comment From Neil Visnapuu]
there goes the “Rally” 9:47 Joe Weisenthal: Yeah, Dow up just 15 pts.
9:48 [Comment From Neil Visnapuu]
said this before – waive fed income tax for 1 year 9:48 [Comment From Neil Visnapuu]
same cost as the bailout 9:48 [Comment From GlassHammer]
Hatch are you referring to PAC money? 9:50 [Comment From Hatch]
@ Glass…. sure why not 9:50 [Comment From Hatch]
It’s not like all donations come through PAC, lobbyist, etc 9:50 [Comment From Hatch]
Look at Friends of Angelo program and Chris Dodd… buying favours comes in several different flavours 9:50 [Comment From Hatch]
Again – any time we get near 8000. It’s like there is some sort of anchor. Each time we have a rally, ask yourself “Could worse news be on the horizon?” 9:50 [Comment From CU Writer]
If you waive fed income tax, does that mean the money I’m getting back from all of you in the form of the EITC and the free money for having a child goes away too? Or is that just for the people who have to write a check in April? 9:50 [Comment From Hatch]
@ Neil – or we could switch to retail sales tax and let people just save 9:52 Joe Weisenthal: Hey we’re going to wrap this up at 10:00 so you have a few more minutes. Get your thoughts in, and definitely let us know what stories you think we should cover that we haven’t hit yet this morning.
9:52 [Comment From Hatch]
For those looking to see how favours can be purchased without giving a dime to a campaign: http://articles.latimes.com/2008/jun/14/business/fi-countrywide14 9:53 [Comment From GlassHammer]
What will happen to the many companies that are under balloon payments? Several have the payment due in the next 3-4 months and are under the gun to refinance. Are we going to see a slew of companies filing for Chapter 11? 9:53 [Comment From Neil Visnapuu]
well, don’t about implementation, but we roughly take in 1trillion in income tax on individuals, which is roughly where we’re at in bailing out the banks and buying up L3 stuff…my guess is a 1 year repreive on witholding would both encourage more spending, more hiring, and more borrowing (as there’s more money to round) 9:53 [Comment From James]
i go with the saving…..i personally dont own to much in the way of assets….i’m enjoying the cheaper prices…..and seriously we’re like hamsters on a wheel here 9:53 Joe Weisenthal: GE now up over 5% after today’s announcement.
9:54 [Comment From Neil Visnapuu]
jpm toast 9:54 [Comment From James]
Mr. Weisenthal you guys do a fantastic job 9:54 Joe Weisenthal: Thanks James. Appreciate it.
9:55 Joe Weisenthal: Gunmakers moving up for a second day.
9:56 [Comment From Lew]
I like the chat format, a little slow but iam sure youll work out the kinks 9:56 [Comment From Hatch]
@ Joe – I’ve seen some discussion on commercial real estate issues on the site recently. However, there is a developing story that would be nice to hear CS take. Mall foreclosures may be rising soon since so many retailers are going belly up. No retailers – no rent – no income – no mortgage – foreclosure. 9:57 Joe Weisenthal: Yeah, it’d be interesting to see how mall-specific MBS are doing, though I think the mall REITS are probably pretty awful.
9:57 [Comment From Lew]
maybe a contest each day to garner interest 9:58 [Comment From CU Writer]
Apocalypse rally? With guns up, check canned goods manufacturers! 9:58 John Carney: Hatch: thanks. That’s definitely something we’ve been looking into. Definitely already heard some chatter about mall problems. The worst off may actually be high end malls, which anecdotal evidence (and TIF performance) suggests are doing very poorly now.
9:58 Joe Weisenthal: Campbell’s soup has been a relative outperformer
9:59 [Comment From Hatch]
One example: http://seekingalpha.com/article/83715-commercial-re-trends-mall-foreclosures-housing-tracker 9:59 [Comment From Lew]
have a great day everyone. 9:59 Joe Weisenthal: You too.
10:00 John Carney: What’s more, older vintage commercial real estate mortgages are even more likely to default than older vintage home loans because they have huge bullet payments and the owners don’t really build up equity over time. So, unlike home loans, commercial loans don’t necessarily get safer over time.
10:00 [Comment From Hatch]
Interesting correlation is what mall foreclosure would do to economic growth prospects 10:00 John Carney: Thanks to everyone for turning up and tuning in this morning. As long as there’s interest in this kind of thing, we’ll keep up the morning dialogue. I’m already finding it very useful.
10:01 [Comment From Hatch]
I’d sit here till lunch if I could 10:02 [Comment From Lew]
thanks 4 offering it 10:02 [Comment From CU Writer]
Yeah I just did some quick maths; please don’t rescind the income tax this year. Based on the horrible job I had for the first six months, I’ll likely be getting a check for $1200-1400 depending on my estimates for how much tax I’ve paid already. 10:02 [Comment From Scott]
All of this is retarded. We disproved all of this government spending Keynesian stuff decades ago. I’m just so sad we are repeating all of our mistakes. In the late 1920’s it was margin. Now it’s HELOC. IT’s all the same old stuff. 10:02 Joe Weisenthal: Yeah, we’re going to wrap it up. As John said, we’re going to keep doing this and the plan is to bring in special guests when we can, so stay tuned.