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Markets live transcript 19 Sep 2008

Posted by Paul Murphy on Sep 19 11:01.

Markets live chat transcript for the chat ending at 12:04 on 19 Sep 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)

PM:
Welcome to Markets Live
PM:
This is FT Alphaville’s daily market chat
PM:
First off, everyone joining must open this link in a separate window
PM:
PM:
Right click — choose sep windown
PM:
PM:
Okay – for those of you who haven’t entered yet, we have a fantastic competition for you this morning.
PM:
Given the events of the past week, which includes news BROKEN BY THE BBC that Lloyds would be taking over HBOS.
PM:
We have a very special prize for you this morning.
PM:
We have a fabulous prize – steel cube that comes from Lehman Brothers.
PM:
Think it’s a stainless steel number – about an inch – cubed. And on each face of the cube its go something a Lehman felt might say to hack calling up the press office.
NH:
Wot, like no comment.
PM:
Exactly.
PM:
Anyway, Lehman memorabilia is fetching a huge price on eBay at the moment. But we thought it would be better to offer it to the readers – who have been just tremendous through this difficult time.
NH:
Anyway, Lehman memorabilia is fetching a huge price on eBay at the moment. But we thought it would be better to offer it to the readers – who have been just tremendous through this difficult time.
NH:
sorry glitch there
PM:
NH:
i did not write that you did
PM:
So we are having a competition.
PM:
Where will the FTSE 100 stand at 12 noon today.
NH:
That’s after the terrible torching of the bears.
NH:
PM:
HOWEVER – you must post your forecast below or on the competition post BEFORE 11.30.
NH:
The mosters of mayfair have been slain this morning
PM:
And make sure you put a name on the forecast.
NH:
One entry per reader. No entries from FT people or their families or employees of the FSA.
PM:
Yeah — no FSA employees
NH:
FTSE 100 currently up 395.1 at 5,275
NH:
that’s a jump of 8%
NH:
and that’s almost erased this week’s losses of 9%
PM:
Here’s the cube
PM:
NH:
That’s a rubbish photo.
PM:
Yeah, well just taken in a rush on my blackberry last night.
PM:
We will get the cube polished up for you. – the lucky winner.
NH:
PM:
Right where first?
NH:
To this comforting news that the authorities have averted a financial terrorism attack?
NH:
That’s what the FSA and SEC should be checking on according to Jim Cramer on CNBC
PM:
Shorting the banks is a great way to take down to America he said. And he’s checking with all the regular shorters that he knows – and none of them are trying to bring down Wall St – so it must be terrorists.
PM:
NH:
Hence the FSA have deployed a weapon known as a daisy-cutter in London. – otherwise known as the Mother of All Bombs.
PM:
MOAB
NH:
First used against Al Qaida in the caves of Afganisthan
NH:
MOAB length is 30 feet, 1.75 inches (9.17 m), diameter is 40.5 inches (102.9 cm), weight is 22,600 lb. (9.5 tonnes), of which 18,700 lb. (8.4 tonnes) are high explosives. Blast radius is 450 feet (137.61m, 150 yards), though the massive shockwave created by the air burst is said to be able to destroy an area as large as nine city blocks. Due to its large size and weight, it must be dropped out of the back of a cargo aircraft, usually a C-130. It is guided by global positioning technology and uses a parachute to pull it out of the cargo door, so it can be dropped from a higher altitude and with higher accuracy than its predecessor, the BLU-82. It is the first U.S. weapon to use Russian-style lattice control surfaces (referred to as “Belotserkovskiy grid fins”),[3] like those used on the R-400 Oka and Vympel R-77. It is only slightly smaller than the Grand Slam bomb of World War II.
NH:
The MOAB uses 18,700 pounds of H6 as its explosive filler.[4] At 1.35 times the power of TNT, H6 is one of the more powerful explosives used by the U.S. military. H6 is an explosive combination of RDX (Cyclotrimethylene trinitramine), TNT, and aluminum. H6 is typically employed by the military for general purpose bombs, and is an explosive composition which is produced in Australia. H6 is a widely used main blast charge filling for underwater weapons such as mines, depth charges, torpedoes and mine disposal charges. HBX compositions (HBX-1, HBX-3, and H6) are aluminized (powdered aluminum) explosives mainly used as a replacement for the now obsolete explosive, known as torpex.[5] HBX-3 and H6 have lower sensitivity to impact and much higher explosion test temperatures than torpex. The warhead is designated the BLU-120/B, Blast.
NH:
Although its effect has often been compared to that of a nuclear weapon, it is only about one thousandth the power of the atomic bomb used against Hiroshima: it is equivalent to around 11 tons of TNT, whereas the Hiroshima blast was equivalent to 13,000 tons of TNT and modern nuclear missiles are far more powerful than the atomic bomb used against Hiroshima. However, the MOAB bomb’s yield is comparable to the smallest of nuclear devices, such as the M-388 Davy Crockett.
PM:
Where’s that from?
NH:
That’s from the FSA website.
PM:
PM:
Here’s a picture:
PM:
PM:
PM:
STOP
PM:
Carlomagno is right
PM:
Please go here to paste your predictions
PM:
PM:
That was my fault
PM:
NH:
and G Cox you are right Sants did call the bottom of the market the other day
NH:
but then he did know something we didn’t
NH:
he about to drop the daisy cutter on mayfair
NH:
PM:
It’s utter utter chaos out there.
NH:
Amid the FSA UNPRECENDENTED panic move to ban all shorting of financial stocks
NH:
And with the Lehman unwind trying to happen.
NH:
And the triple witching with futures and options contracts expiring in London.
NH:
The latest news is that Hermes – the BT pension fund – has announced it will not be lending stock in 20 global financials
PM:
Of typical – sometimes get the idea that Hermes is run for the benefit of its press clippings book, rather than for BT pensioners.
PM:
RIGHT
PM:
earlier the Footsie was up 9.2per cent — adn that was looking like the biggest oneday move every
PM:
Thank you to the good reader that supplied us with the ready-reckoner.
PM:
The previous best was October 21 – recovering from the 1987 crash, when prices jumped 7.89 per cent.
PM:
But we’ve come off the top a bit in London
NH:
FTSE 100 up 376 at 5,260
NH:
of course, this morning’s move is not just down to the FSA shorting ban
NH:
there is also the small matter of giant bad bank being created in the US
NH:
into which all manner of toxic mortgage stuff can be dumped. then the whole can be towed offshore and sunk
PM:
The Mother of All SiVs — The MOAS
NH:
end of problem
NH:
and how ironic is this
NH:
a Lehman note on a potential RTC
PM:
RTC being Resolution Trust Corporation — used in the saving s and loans bail out
PM:
IN the early 80s
NH:
Bank stocks rose 13.8% yesterday (vs. S&P 500 up 4.3%). This marked the 2nd best day (both absolute & relative) in the 15-plus year
history of the BKX (after 7/16/08; WFC dividend hike). We also saw an intra-day move from the day’s low to the close of 25.0% (vs. S&P
500 up 6.4%). There appeared to be two catalysts for the move, in our view. First, it was widely reported that government bodies are
looking to set-up a Resolution Trust Corporation (RTC) like facility.
NH:
Still, one difference we believe is likely in the current environment is
that while the RTC of the late 1980s/early 1990s held and then sold assets of failed banks, we believe it’s possible this go around, an
entity will purchase assets from solvent institutions at a discount and unwind them over time. Still, this isn’t necessarily a fix for asset
valuations. We note, in our coverage, TCB, FHN, BBT, SNV, WB and STI have over half of their loan portfolios tied to residential real
estate. And second, it appears short selling has become much more onerous and possibly temporarily banned. The U.K.’s FSA banned
short-selling of financial companies for the rest of the year and it appears the SEC may issue a temporary ban on short-selling. In terms
of percent of shares short, ZION, FHN, NCC, SNV, TCB and CMA screen as the highest per the most recently disclosed data.
NH:
Recall, the RTC was a U.S. Government-owned asset management company mandated to liquidate assets (primarily real
estate-related) that had been assets of S&Ls declared insolvent by the OTC. Between 1989 and mid-1995, the RTC closed
or otherwise resolved 747 thrifts with total assets of $394 billion. The RTC mainly used “equity partnerships” to help liquidate
real estate and financial assets which it inherited from insolvent thrift institutions
NH:
While a number of different structures were
September 19, 2008
Large-Cap Banks
Industry Overview
Possible RTC + Short Ban = Big Move
Sector View:
New: 1-Positive
Old: 1-Positive
Jason M. Goldberg, CFA
1.212.526.8580
jgoldber@lehman.com
LBI, New York
North America
Financial Services
Large-Cap Banks

This entry was posted by Paul Murphy on Friday, September 19th, 2008 at 11:01 and is filed under Uncategorised. Edit this entry.

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