I know we are just supposed to swallow that: the $900M break-up fee...because so much work had been spent constructing the deal...all those consultants.
So is Sallie Mae nearly a billion dollars richer?
The deal is worth $25B...does the 4% penalty fee look monstrously large to you...or do you have a RE background? The financial boys are killing us hosts.
The purpose of the rate cut is to prevent bank runs and abject panic.
Not to save idiots.
Even the proposals to save the homeowner from resetting arms will have little effect if RE is dropping so fast that there is no equity or negative equity in the deal.
The value of assets is not determined by some psychological state of mind called confidence,that they are so determined to have you believe, but rather by the amount of physical money available to be spent on those assets, depending on their realistic value, and supply thereof. In the end, permanent reality always wins over temporary psychology.
I like to think of $900 million as a Big Mac for every man, woman, and child in the country, but hey, maybe that's just me. I'm all about spreading the risk out to prop up this crazy system of ours. I think we should take on our fair share of the burden. No corporation should have to shoulder the costs alone.
Here's what's on the tentative schedule.
Next week: Extra Value Meal!
October: 27" Huffy bicycle!
November: Detroit Condo!
December: Toyota Camry!
Be patient. If you don't see a prize you'd like to contribute to the cause there's always next year!
regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.
That rate cut was mostly because the boss said so. I can see it now, Bush thinks he has it all under control when the Shiek calls on the private line and says 'wtf george, do you remember who got you that job?
Sept. 20 (Bloomberg) -- Nasdaq Stock Market Inc. and Borse Dubai, competing to buy Nordic exchange operator OMX AB, agreed to give Nasdaq control of OMX, while Dubai gets a stake in the U.S. bourse and a holding in London Stock Exchange Group Plc.
Nasdaq will also make an investment in the Dubai International Financial Exchange, Nasdaq said in a statement today. Dubai will in return get a 19.99 percent stake in Nasdaq, restricted to 5 percent of voting rights, as well as a 28 percent of the London Stock Exchange from Nasdaq.
...
Dubai's bid for OMX threatened to foil Nasdaq's latest attempt to expand into Europe, ..
These guys really have to get thier acts together. Northern Rock again. Deposits of new accounts won't be guaranteed. Stock down 30%. For heaven's sake!
Is it possible someone went to the Times with the "we'd pay the $900M breakup" story solely to put pressure on Sallie Mae to deal? i.e. not with any actual intention to pay it? I don't know how such things work.
10 years later, when you look back on today, you will realize that the minority of those, who were not afraid to buy at this time were the real winners. Being a bull here is an easy contrarian play, as far as I can tell.
If you are suggesting that 9/11 was an inside job, I would assign a probability greater than zero to that premise...George was out of town. Reading children's books.
Your conspiracy theory is the only child's story here.
Let's stick to serious issues, like the economy, housing, etc. And save the black helicopters talk for Daily Kos - it fits in better there.
Heres the GS link, profit up 79%http://www.marketwatch.com/news/story/goldman-sachs-q3-profit-rise/story.aspx?guid=%7B8A7CBFA1%2DBD49%2D40A0%2D86E0%2DB640650190F2%7D&dist=hplatest
When higher interest rates triggered defaults in US sub-prime mortgages this year, it did not take long for commercial real estate to get caught in the fallout.
European real estate share prices fell 11.4% in the second quarter, leaving them marooned at a discount to other assets that exceeded 20%, according to the Standard & Poors/Citi index. The world real estate index was down 6.6% thanks to a 2% gain in Asia but overall morale was poor.
I've had 20% of my portfolio in euro denominated debt for 2+ years, earning 4+% on top of the 15% currency appreciation, will likely see another 5% in the Euro by year end.
Depending on what happens to muni yields, we'll either roll the eurobonds over(if 20yr munis remain below 5%) or sell into strength(if muni yield rises above 5% amd the Euro gets near $1.50)
Sebastian, you have been hanging out here too long. Going against the bears is not a contrarian play. The bears are the contrarian play. Did you see the reaction to the rate cut? Did you see the whooping and hollering on CNBC? The vast majority of investors think Ben has just bailed out the markets and it's straight on up from here.
And whilst it may be hard to imagine the dollar getting any weaker v the Euro, ask yourself if you ever thought you'd see a bank run. Anything can happen now.
Firstly, an observation: Objects in Reality may be further away that they appear.
This is not to dispute that reality eventually kicks back.
Secondly, a homework assignment: Disentangle "realistic" value from psychology, and while you're at it, clearly articulate the non-overlapping relationship between confidence, money and psychological states.
Actually, I'd love it for someone to provide at least UberBulletPoints on the whole Money-Confidence theory thing from a Economics viewpoint. Too much Archaeology in my background makes me very comfortable with seashells, large stones and cacao beans as money and with people preferring jade to gold.
"Jobless claims still falling." I heard Robert Reich say yesterday that only 40% of the unemployed are covered by unemployment insurance. I don't know if this is true or not, but it could be an explanation for rising unemployment while jobless claims remain relatively stable.
From makingwageswork.org on percent of workers eligible for unemployment insurance (UI)
(quote)
...In effect each state administers a separate UI program that differ greatly from state to state. As a result, in some states, less than 20 percent of unemployed workers receive unemployment benefits and in others the rate can reach up to 65 percent....
The increase in the number of non-traditional workers has contributed to a decline in UI participation rates. In the 1940s UI claims hovered around 50 percent of total unemployment, during the 1960s the proportion slowly dropped to around 40 percent and during the 1980s it dropped again to around 35 percent. In other words, currently only around one in three unemployed workers claims unemployment insurance, with significant variation from state to state....
(end quote)
It would be really interesting to have current stats on how much the decrease in eligibilty for UI has increased in the last decade or so.
What would the effect be on these initial claims numbers?
This may sound crazy, but isn't it possible that Sebastian works for the USG, at one of those agencies that keep finger on the pulse of blogs, and almost certainly participates in the dialogues? (For the purposes of identifying potential troublemakers and distracting real participants from the inconvenient truths.)
Slightly OT, gold just broke upward to a 730+ spot price, as the dollar fell to about 78.80.
An excerpt from my CEO's newsletter about the progress of their LBO buyout:
"Yes, there have been market dynamics, but Hellman & Freidman are moving in one direction with certainty. Public communication this last week, shared that Catalinas going private deal is on a solid foundation and direction that will likely be one of the first deals coming out of this dynamic financial market environment."
I used to work (until 2 weeks ago) for a studenyt lending company - Nelnet. They just laid off 400 or 12% of their workforce because they see changes in the new HEA legislation as cutting their margins by 67%.
The gravy train days of student lending are over. That's why this deal is dying, not the credit crunch. There are discussions (hushed discussions) within Nelnet about exiting the asset origination side of student lending altogether. Legislation is highly biased against private label FFELP lending and the margins are evaporating. Still money to be made in servicing (sound familar??) and on fee-based, non-loan products for the education market and the 'education seeking family'. That's the direction Nelnet is following and likely all the other major student loan players.
Hey, while we're on the subject of UI, does anyone know what happens to the Fed differential?
As some of you may know, the Feds mandate a minimum UI tax rate. A business owner in a state that has a lower rate than the minimum has to send the difference to the IRS. Does that fund UI for federal employees or something? Is it distributed back to the states? Free money for the Treasury?
Wasn't the 50 point drop in Fed rate suppose to push these deal through?
I know we are just supposed to swallow that: the $900M break-up fee...because so much work had been spent constructing the deal...all those consultants.
So is Sallie Mae nearly a billion dollars richer?
The deal is worth $25B...does the 4% penalty fee look monstrously large to you...or do you have a RE background? The financial boys are killing us hosts.
"The financial boys are killing us hosts."
Exactly.
Party's over.
Appears the rate cut made no difference at all. Who woulda thunk it?
$900M is some serious coin. That's almost a whole year's worth on net income for SLM. Why bother negotiating?
The purpose of the rate cut is to prevent bank runs and abject panic.
Not to save idiots.
Even the proposals to save the homeowner from resetting arms will have little effect if RE is dropping so fast that there is no equity or negative equity in the deal.
The value of assets is not determined by some psychological state of mind called confidence,that they are so determined to have you believe, but rather by the amount of physical money available to be spent on those assets, depending on their realistic value, and supply thereof. In the end, permanent reality always wins over temporary psychology.
JCF manages about $5B in equity capital, maybe less. They have no way of paying the break up fee. Cannot do it. No way.
I like to think of $900 million as a Big Mac for every man, woman, and child in the country, but hey, maybe that's just me. I'm all about spreading the risk out to prop up this crazy system of ours. I think we should take on our fair share of the burden. No corporation should have to shoulder the costs alone.
Here's what's on the tentative schedule.
Next week: Extra Value Meal!
October: 27" Huffy bicycle!
November: Detroit Condo!
December: Toyota Camry!
Be patient. If you don't see a prize you'd like to contribute to the cause there's always next year!
regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.
Are we headed for an epic bear market? - MSN Money
Sounds like the first rain drops are starting to fall on Wall Street's rate cut parade.
That rate cut was mostly because the boss said so. I can see it now, Bush thinks he has it all under control when the Shiek calls on the private line and says 'wtf george, do you remember who got you that job?
It is some peoples understanding that the Sallie Mae deal can go through, if the colleges and universities will eliminate the month of February.
USD Index at 78.76 now!
Sept. 20 (Bloomberg) -- Nasdaq Stock Market Inc. and Borse Dubai, competing to buy Nordic exchange operator OMX AB, agreed to give Nasdaq control of OMX, while Dubai gets a stake in the U.S. bourse and a holding in London Stock Exchange Group Plc.
Nasdaq will also make an investment in the Dubai International Financial Exchange, Nasdaq said in a statement today. Dubai will in return get a 19.99 percent stake in Nasdaq, restricted to 5 percent of voting rights, as well as a 28 percent of the London Stock Exchange from Nasdaq.
...
Dubai's bid for OMX threatened to foil Nasdaq's latest attempt to expand into Europe, ..
SOUNDS LIKE A CLEVER BOX CUTTER MOVE TO ME.
Mike/a.k.a.Sage
Yes Sir:
Trash the electorate, trash the dollar.
Ignore reality at your own peril.
Mark Zandis presentation at the homebuilder conference is very bearish:
2007 Homebuilder Conference
He predict house prices down to "90's" level, California and Florida are screwed, Financial crisis not over more to come, etc, yadda yadda.
5am and the USD is crashing.
Snore away USSA
Yep, European stock markets are all down this morning and the dollar fell to 1.4065 against the euro.
Dollar Heads for Third Weekly Loss Versus Euro on Fed Rate Bets - Bloomberg.com
Was that it? Is that all we're going to get from the cut? Hardly seems worth all the trouble.
MSNBC Money is seriously speculating
about a bear market? I'm calling the bottom, then.
Katie has to get to work, get off her butt, and bar the door now.
The yen is strengthening.
Boy, is that rate cut going to look miserable in a few days.
Too little, too late.
TulsaTime,
If you are suggesting that 9/11 was an inside job, I would assign a probability greater than zero to that premise.
I think "Too good to be true," as far as George was concerned has to be the analysis.
And, please recall, one of those jets was headed for the White House.
And George, well George was out of town. Reading children's books.
How convenient.
These guys really have to get thier acts together. Northern Rock again. Deposits of new accounts won't be guaranteed. Stock down 30%. For heaven's sake!
Northern Rock falls on government warning |
Money |
guardian.co.uk
Is it possible someone went to the Times with the "we'd pay the $900M breakup" story solely to put pressure on Sallie Mae to deal? i.e. not with any actual intention to pay it? I don't know how such things work.
BofE head King blames the "Law" for Northern Rock Run
The governor of the Bank of England revealed this morning that legal advice prevented him from launching a secret rescue plan for Northern Rock.
At what point do people start believing in transparency, or is crony capitalism King?
Don't answer that.
Bears will only get beer money
10 years later, when you look back on today, you will realize that the minority of those, who were not afraid to buy at this time were the real winners. Being a bull here is an easy contrarian play, as far as I can tell.
C'mon arbogast,
Your conspiracy theory is the only child's story here.
Let's stick to serious issues, like the economy, housing, etc. And save the black helicopters talk for Daily Kos - it fits in better there.
OT: Fedex lowers guidance to $1.60-1.75 instead of estimate of $1.97
FedEx net income rises 4%, but issues profit warning - MarketWatch
Deals smeals! What about OJ?
Frank,
I would, in the approximate words of Sir Norman Fry, love to believe that I'm wrong, but it was a Saudi deal, top to bottom.
However, you are absolutely right that that sort of speculation is not appropriate for these comments. Sorry.
I guess my only excuse is that it was less depressing to think about than what's happening now.
And, to Sebastian, I say, "Diversify!"
Get some short exposure into your portfolio, because I have a really awful feeling what's coming next.
Euro > $1.40?
That's not good.
Goldman Sachs reports revenue up 63%.
I guess they couldnt find the kitchen sink.
Heres the GS link, profit up 79%http://www.marketwatch.com/news/story/goldman-sachs-q3-profit-rise/story.aspx?guid=%7B8A7CBFA1%2DBD49%2D40A0%2D86E0%2DB640650190F2%7D&dist=hplatest
Try again
Goldman Sachs Q3 profit rise 79% - MarketWatch
OT: Commercial property is feeling the pinch
US Edition - Financial News Online
When higher interest rates triggered defaults in US sub-prime mortgages this year, it did not take long for commercial real estate to get caught in the fallout.
European real estate share prices fell 11.4% in the second quarter, leaving them marooned at a discount to other assets that exceeded 20%, according to the Standard & Poors/Citi index. The world real estate index was down 6.6% thanks to a 2% gain in Asia but overall morale was poor.
Good time to convert euros to dollars, not the other way.
arbogast: ...I guess my only excuse is that it was less depressing to think about than what's happening now.
I'm with you there!
I've had 20% of my portfolio in euro denominated debt for 2+ years, earning 4+% on top of the 15% currency appreciation, will likely see another 5% in the Euro by year end.
Depending on what happens to muni yields, we'll either roll the eurobonds over(if 20yr munis remain below 5%) or sell into strength(if muni yield rises above 5% amd the Euro gets near $1.50)
Jobless claims still falling:
Initial jobless claims fall 9,000 to 311,000
These numbers do not support claims of a weak labor market.
5am and the USD is crashing.
Snore away USSA
CAD is almost at parity with USD. Maybe all those Canadians will move to Florida and buy up the REOs ?
Sebastian, you have been hanging out here too long. Going against the bears is not a contrarian play. The bears are the contrarian play. Did you see the reaction to the rate cut? Did you see the whooping and hollering on CNBC? The vast majority of investors think Ben has just bailed out the markets and it's straight on up from here.
And whilst it may be hard to imagine the dollar getting any weaker v the Euro, ask yourself if you ever thought you'd see a bank run. Anything can happen now.
So what stage of grief is Sebastien in?
Denial: The rally continues!
Anger: It's the nattering nabobs of negativism's fault!
Bargaining: All I want is 25 cents on the dollar!
Depression: Will you buy my apple for $5.00?
Acceptance: I guess I missed the call.
Mike/a.k.a.Sage
Firstly, an observation: Objects in Reality may be further away that they appear.
This is not to dispute that reality eventually kicks back.
Secondly, a homework assignment: Disentangle "realistic" value from psychology, and while you're at it, clearly articulate the non-overlapping relationship between confidence, money and psychological states.
Actually, I'd love it for someone to provide at least UberBulletPoints on the whole Money-Confidence theory thing from a Economics viewpoint. Too much Archaeology in my background makes me very comfortable with seashells, large stones and cacao beans as money and with people preferring jade to gold.
"Jobless claims still falling." I heard Robert Reich say yesterday that only 40% of the unemployed are covered by unemployment insurance. I don't know if this is true or not, but it could be an explanation for rising unemployment while jobless claims remain relatively stable.
From makingwageswork.org on percent of workers eligible for unemployment insurance (UI)
(quote)
...In effect each state administers a separate UI program that differ greatly from state to state. As a result, in some states, less than 20 percent of unemployed workers receive unemployment benefits and in others the rate can reach up to 65 percent....
The increase in the number of non-traditional workers has contributed to a decline in UI participation rates. In the 1940s UI claims hovered around 50 percent of total unemployment, during the 1960s the proportion slowly dropped to around 40 percent and during the 1980s it dropped again to around 35 percent. In other words, currently only around one in three unemployed workers claims unemployment insurance, with significant variation from state to state....
(end quote)
It would be really interesting to have current stats on how much the decrease in eligibilty for UI has increased in the last decade or so.
What would the effect be on these initial claims numbers?
Jose Padilla, great minds think alike...
By the way, how's the appeal coming?
This may sound crazy, but isn't it possible that Sebastian works for the USG, at one of those agencies that keep finger on the pulse of blogs, and almost certainly participates in the dialogues? (For the purposes of identifying potential troublemakers and distracting real participants from the inconvenient truths.)
Slightly OT, gold just broke upward to a 730+ spot price, as the dollar fell to about 78.80.
An excerpt from my CEO's newsletter about the progress of their LBO buyout:
"Yes, there have been market dynamics, but Hellman & Freidman are moving in one direction with certainty. Public communication this last week, shared that Catalinas going private deal is on a solid foundation and direction that will likely be one of the first deals coming out of this dynamic financial market environment."
I used to work (until 2 weeks ago) for a studenyt lending company - Nelnet. They just laid off 400 or 12% of their workforce because they see changes in the new HEA legislation as cutting their margins by 67%.
The gravy train days of student lending are over. That's why this deal is dying, not the credit crunch. There are discussions (hushed discussions) within Nelnet about exiting the asset origination side of student lending altogether. Legislation is highly biased against private label FFELP lending and the margins are evaporating. Still money to be made in servicing (sound familar??) and on fee-based, non-loan products for the education market and the 'education seeking family'. That's the direction Nelnet is following and likely all the other major student loan players.
Hey, while we're on the subject of UI, does anyone know what happens to the Fed differential?
As some of you may know, the Feds mandate a minimum UI tax rate. A business owner in a state that has a lower rate than the minimum has to send the difference to the IRS. Does that fund UI for federal employees or something? Is it distributed back to the states? Free money for the Treasury?
Thanks for that, chophouse.