Monday, September 15, 2008

financial musings

I did have a transit post for today, but seems a bit trivial given the other doings in the world. I am kind of amazed that the stock market sell off has not induced even more panic type behavior than it has. A 5% selloff is pretty large by any measure, though the markets are used to a lot more volatility these days than in the past. Others may remember October 1987 when the market sold off by over 20% one day, so if things seem bad right now consider what some felt like that day.

The bankruptcy for Lehman Brothers gives everyone pause. I have mentioned that I once worked for Lehman in the early 1990’s. I can’t say there is the tie that makes me fret over its demise. I don’t think I know many there these days, I think a few friends from college are there, but I have not caught up in a while to be sure. But for me it brings back other memories. Lehman is (was?) located in the World Financial Center right next to WTC and my commute every day was via a subway stop across the underground concourse at the WTC. When I saw the area post 9/11, there was a chunck out of the WFC tower where Lehman was located near the floor I worked on. It’s all awfully strange to think about to this day.

Locally what does it all mean? The Pittsburgh Business Times ran a headline this afternoon I thought a bit presumptive: “Pittsburgh financial institutions may feel short-term effect from Lehman bankruptcy” . That headline was changed to a more precise and narrower: “BNY Mellon not among Lehman's unsecured creditors”. I can’t imagine the full fallout from Lehman’s bankruptcy is known yet. Lehman might owe certain institutions money, but if their debt defaults what about those creditor firms who then can’t pay their debts. I think this would all be described as a cascade failure. If I were a business editor with some interns around, I would be seeing who in town owns up to large holdings of debt or equity from Lehman or Fannie of Freddie, etc.. etc. It's the 'etc' that is going to bite someone unexpected.

Last thought. How big a drop has wall street endured… another way to look at it is to ask how much growth has there not been on Wall Street for some time. One way to look at the drop today. The level the Dow close at today was first hit in April of 1999. The Nasdaq was nearly twice its current value as far back as 2000. To put that in some perspective, the October 1987 crash put Dow Jones back to where it had been less than a year to a year and a half earlier.

With that I will go back and stick to the knitting.

7 Comments:

Anonymous MH said...

So stocks aren't making any money. Banks that aren't about to go under are paying barely enough interest to match inflation. And even though we've avoided big problems locally, investing in real estate doesn't seem like the best idea right now. Maybe I should try to get a bus at a bankruptcy auction and just drive it in a loop from Squirrel Hill to Oakland.

Monday, September 15, 2008 10:54:00 PM  
Blogger C. Briem said...

diesel costs too much for that, maybe you could live in the bus.

Monday, September 15, 2008 10:58:00 PM  
Anonymous MH said...

Also, I don't have a CDL and there may be some permits or something that I need.

Monday, September 15, 2008 11:43:00 PM  
Blogger EdHeath said...

A bicycle powered rickshaw?

Tuesday, September 16, 2008 6:31:00 AM  
Anonymous MH said...

Bicycles are for children and the French.

Tuesday, September 16, 2008 9:54:00 AM  
Anonymous MH said...

Let me revise. I don't want to start that whole bicycle vs. car thing again. The combination of hilly terrain and narrow, crowded abominably maintained streets makes Pittsburgh's East End a poor place in which to use a bicycle for transportation. Especially since the most common location for riding a bicycle is right in front of MH when he's in a hurry and there is no room to pass.

Tuesday, September 16, 2008 10:07:00 AM  
Anonymous Anonymous said...

Wow. I started building my retirement fund around 1999. No wonder it's not going anywhere.

BTW, Lehman moved up to Times Square area after 9/11, on 7th Ave. I believe. Read some article recently that said they bought a building from another brokerage--Morgan Stanley or perhaps Merrill Lynch.

Wednesday, September 17, 2008 9:14:00 AM  

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