Archive for the 'Uncategorized' Category Page 2 of 39
October 22, 2008 7:08PM
By Alexis Glick
When you think about alternative energy, natural gas and wind power, you can’t help but think of T. Boone Pickens. When you think alternative energy and green technology, you can’t overlook former New York Governor George Pataki. Between the two of them, they could revolutionize the way we use energy in this country.
It is not an easy task, and both gentleman have been fighting to create awareness for most of their lives. Did they take it up a notch as oil and gasoline prices spiked to record levels earlier this summer? Absolutely. Pickens created the Pickens Plan asking the next president of the United States to sign a pledge to do something about energy consumption within the first one hundred days in office. Will Pickens get that pledge? I think he will.
Here is the T. Boone Pickens’ Energy Independence Pledge:
“We will no longer stand by and watch as America’s national security and economy become more dependent on the unstable foreign nations that we rely on for nearly 70% of the oil we use each day. We spend nearly $700 billion every year buying foreign oil, which represents the greatest transfer of wealth in the history of mankind. The new President and the 111th Congress need to enact an energy plan that reduces our foreign oil dependence by at least 30% within ten years. This plan must include proven American technology and resources; the development of new energy sources; and the expansion and modernization of the national electrical grid to transport renewable energy to homes and businesses. Delaying any further means tacit support for continuing America’s addiction to foreign oil. I join with T. Boone Pickens and his army of supporters in calling for an Energy Independence Plan to be enacted within the first 100 days of the new administration.”
For more on the Pickens Plan, check out the blog I wrote in September — “Getting Off the Oil Addiction”.
Whether or not Pickens or Pataki get an immediate response to what they’re so passionately fighting for has yet to be determined. One thing is for sure — their voices are being heard. The risk for them is that politicians, economists, executives and the American people will lose sight of the ball, especially now that oil and gas prices have pulled back dramatically from where they were this summer.
Pickens believes the dialogue in this country that became a household topic in the spring and summer is part of the reason why energy prices declined. The conversation woke people up. All of a sudden, they seemed to realize that we’re paying $700 billion dollars to import oil from people who don’t really like us. As far as he is concerned, our dependence on oil is a National Security issue.
You ask what is in it for them? Pickens does run a shop called BP Capital, a hedge fund, which, based on the record pullback in energy prices, is getting pummeled after Pickens repeatedly called for a return to $150 oil. I asked him about that in our interview, and he was very candid about his losses. Does he have an interest in where prices go? Yes. His interest is both a personal, a business and a professional endeavor to help change this country’s habits.
Does Pataki have skin in the game? Sure. He has been at the forefront of the Green movement and has worked with Pickens for years while making changes to carbon emissions. After serving three terms as governor, he joined the law firm Chadbourne & Parke LLP. Pataki’s practice focuses on energy, environmental and corporate matters. I wrote about Pataki in a blog several months ago entitled, “Mr. Alternative Energy.” I was so impressed by his vast knowledge and committment to raise awareness and make changes. He continues to fight the fight.
Take a look at my exclusive two-part sit down interview with them and check out how they respond to whether they should consider running for president and vice president in 2012.
October 21, 2008 6:52PM
By Alexis Glick
Confused, scared, angry, frustrated? Don’t know where to begin on preparing for your financial future? Need some good advice? Well, look no further. Two of the smartest people joined me this morning on Money for Breakfast with great investment tips, perspective on the volatility in the equity markets and how to prepare for retirement.
Let’s start with retirement strategies. Lynne Ford, a senior VP with Wachovia’s retirement group, had such outstanding advice about preparing for our financial futures. She was able to explain (in English!) why consulting with a personal financial planner is essential when preparing for retirement, especially given the fact that most people live 20 years past their retirement. Wachovia’s (and now Wells Fargo’s) retirement analysis and Lynne’s many years of experience provide some terrific advice. Take a look.
Bob Doll, vice chairman and chief investment officer at BlackRock, joined me to offer his insight into investment opportunities, market volatility, and the potential second stimulus package. As always, he plays it straight down the middle. He sees opportunity in corporate bonds with multi-year or decade-high yields. He also suggests that a 3% yield on the S&P 500 is pretty compelling. Ironically, just moments before he joined me, Blackrock reported disappointing earnings and a decline of 12% in assets under management from Q2 to Q3. Not a huge surprise. Part of that due to declining market value and part due to redemption. Take a look.
October 21, 2008 2:11PM
By Alexis Glick
This morning on The Opening Bell Stephen Schork, editor of The Schork Report, joined me to discuss the pullback in oil and gasoline prices. Stephen is very well-respected by Wall Street and by the energy companies he speaks on behalf of. His reports are excellent. They look at the energy markets, the factors impacting the energy markets and point out discrepancies. Look at this stat: OPEC which meets this Friday for an emergency session where they are expected to cut one to two million barrels of production, earned an estimated $821 billion in oil exports in 2008 (thus far) compared to $671 billion in 2007. Saudi Arabia earned the largest share of the 29 members generating $194 billion in revenues. No wonder they want to cut production!
Today Stephen took a stab at the people responsible for the record run up in oil prices; Wall Street and the speculators. In fact it wasn’t a stab, it was a slap in the face to those who he believes are responsible for the record spike. He highlighted fundamentals in the industry and why a run up to that degree is not possible without speculation given the five year move in all prices from $20 a barrel to $70 last year. He also believes that oil prices will settle back in around $60 a barrel and possibly below that.
Hard to believe right? Amazing given that we were at $147 a barrel in mid July. Equally amazing, the pullback in gasoline prices. We reached a high of $4.11 in mid July and are now at $2.95 and heading lower.
On Money for Breakfast we gathered together what we called a national gas roundtable from California to Washington DC to Atlanta. Look at the difference in prices and the difference in opinion on what caused the run up, where we go from here and why we have to be careful that we don’t take our eye off the ball.
October 16, 2008 1:08PM
By Alexis Glick
This morning I had the perfect trifecta! Last night I hopped on a train down to Washington, D.C. to interview the Treasury Secretary, the FDIC Chair and billionaire investor Wilbur Ross. One of these individuals on one show would be enough to excite me but having all three join me this morning made for one of the more memorable days on the job.
Let me begin with the FDIC Chair Sheila Bair who is featured on the cover of today’s Wall Street Journal criticizing the federal government’s plan for failing to address homeowners at risk of foreclosure. Her comments could not be better timed. Thankfully someone within the economic team is saying what certain members of Congress and the American taxpayer were saying almost two weeks ago when they heard about the language of this rescue plan. If the route of the problem is housing, why isn’t it addressed in this plan?
This morning I asked the FDIC Chair about that and about what she is doing to help address those issues. Here is a brief summary of what she said.
“Well we do have a fairly elaborate reporting system now for loan servicers and many of the banks that got this infusion were subject to that reporting. The FDIC does not administer that, it’s their primary regulators, the Office of the Comptroller for currency and the office of Thrift Supervision. But, we do have a fairly robust reporting mechanism now so we can track the rate of foreclosures and long term sustainable loan modifications. I think it’s very important as they modify these loans not to do just short term repayment plans. We need long term solutions. If the mortgage is unaffordable now it’s probably not going to be affordable six months from now. So, permanently modify it, get people in a mortgage they can afford.”
Take a look at the rest of the interview and how she responds to rumors that she was trapped in the middle of Citi’s failed bid for Wachovia when Wells Fargos showed up at the eleventh hour.
Shortly after my interview with the FDIC chair I talked to Wilbur Ross, billionaire investor and chairman & CEO of WL Ross & Co. He made such fascinating points about this financial crisis and like Chairman Bair, highlighted the weakness in housing and the lack of reinvestment language on the part of this rescue plan in lending and preventing more foreclosures.
According to him 12 million families have negative equity in their homes. More than $4.6 trillion has been lost in real estate equity. Time is crucial and he rightly points out that what has lead us to this point cannot be fixed in days or weeks. He notes refinancing one million sub-prime borrowers with approximately $200 billion dollars in loans is complicated and each case is different. He made so many excellent points. Take a look at his interview below.
My last interview was at 9:40am once the markets opened with Treasury Secretary Paulson. As you could imagine, I had dozens of questions. It was hard to select only a few. We talked about how he came about selecting the figure that has now become a part of the national dialogue, $700 billion dollars. We also talked about the mechanics of the plan, whether he failed to correctly sell it and still fails to correctly sell it and whether enough is being done to address housing and lending in the plan. Here is one small excerpt from our interview.
GLICK: How are the steps that we are taking right now in real hardcore facts, how are they addressing housing?
PAULSON: Well let me say this, the key to this is the housing correction, the price declining housing. If we don’t have financing available for housing this isn’t going to work. We have taken strong steps with Fannie Mae and Freddie Mac to make housing and financing available, doing things that encourage banks to lend is going to make housing financing available and so that’s at the heart of the problem and we are going to the heart of the problem.
Here is the interview. He didn’t pull any punches and he admitted he must remain flexible in this environment. Don’t be surprised if new ideas get thrown on the table. They are listening and they know the plan isn’t perfect but they are reacting at record speed and for that we should be thankful.
October 15, 2008 11:09PM
By Alexis Glick
One year ago today, we launched the Fox Business Network. It’s hard to believe it’s been a year already. What a year! In a note sent to us this afternoon by Roger Ailes, the head of the Fox Business Network and Fox News, he describes some of the biggest milestones in the past year.
“No one could have predicted at the time we would see the largest one day point loss and largest one day point gain of the Dow, the bursting of the housing bubble throwing tens of thousands of American homeowners into foreclosure, the demise of iconic names like Bear Stearns and Lehman Brothers, deep trouble at Fannie Mae and Freddie Mac, Merrill Lynch being swallowed whole by Bank of America or the complete seizing up of the worldwide credit system.”
It’s hard to sum up a year — and yet, what Roger said in that note will no doubt wind up in the history books that my children will read someday.
To think, when we first launched a year ago, that we were on the heels of one of the greatest bull markets in U.S. history with the Dow Industrials Average approaching 14,200 and one year later closing just above 8,500. No one could have predicted this.
While the second half of our first full year on television has been mired with earnings disappointments, record writedowns, record high energy prices, an unimaginary amount of firsts and history making events, there have been plenty of euphoric moments. We have been a part of and witnessed one of the greatest races in American history. We watched a Republican senator with 26 years in the Senate come back from nowhere to claim the Republican Party’s nomination, despite the pundits who said he was dead in the water a year ago. We saw a Republican female governor selected as vice presidential candidate — the first female VP candidate since former Rep. Geraldine Ferraro ran with Walter Mondale on the Democratic ticket in 1984. We witnessed the finest Democratic primary and caucus on record with the narrowest of margin victory for Senator Barack Obama, the first African-American to become nominee for the Democratic Party. Record voter turnout. Use of the web in a way that no one knew was possible, creating perhaps the greatest seat change in history for political fundraising dollars. Unprecedented grassroots participation among the youngest demographic of voters.
We saw one of the most respected and admired American companies in history, Anheuser-Busch, get purchased by Belgium brewer InBev in one the biggest cross-border transactions in history. We witnessed record attendance, ratings and dollars made for this year’s Superbowl between the New York Giants and the New England Patriots. Arguably one of the best sporting events in history! Michael Phelps took home the most gold medals in Olympic history for the United States.
On a personal note I have traveled to Davos, Switzerland for the World Economic Forum; to Phoenix, Ariz. for the Super Bowl; to McDonald’s headquarters in Chicago, Ill. where I got to go behind the scenes with my favorite fast food chain; to Washington, D.C. to meet with politicians and business leaders; to St. Louis, Mo. where I got another behind-the-scenes tour at Anheuser-Busch on the anniversary of prohibition and the Clydesdale horses before InBev initiated a merger; to New Orleans, La. for Hurricane Gustav as well as the National Cable Television Association’s annual meeting, where I met and interviewed the top executives at News Corp, Showtime, HBO and AMC and also spent time with Tom Benson and his New Orleans Saints; to Pittsburgh, Penn. where I interviewed the Democratic nominee for President of the United States. It takes my breath away.
I have interviewed people that I have watched from afar, read about or dreamt of meeting. From Senator Barack Obama, to Tiger Woods, to Bob Kraft (CEO of New England Patriots), to football great Michael Strahan, to Steve Tisch (co-owner of the New York Giants and Hollywood movie producer), to Jerry Bruckheimer, to Wes Edens (Fortress CEO), to Archie Manning, to Andrea Jung (Avon), to Cathie Black, to Jim Kelly, to LaDanian Tomlinson, to Alonzo Mourning, to Kobe Bryant, to Don King, to Oscar De La Hoya, to A.G. Lafley (Procter & Gamble), to Gary Garrabrant (Equity International), to Alan Hassenfeld (Hasbro), to Bobby Kotick (Activision Blizzard), to Tony Snow (former White House press secretary), to Henry Cisneros (former HUD secretary), to Senator Hillary Clinton, to Senator John McCain, to Mike Krzyzewski (Duke Blue Devils and U.S. Olympic Gold-Winning Men’s Basketball coach), to T. Boone Pickens, to Wilbur Ross, to Muhtar Kent (Coca-Cola), to Indra Nooyi (Pepsi), to Jamie Dimon (JP Morgan), to Queen Rania of Jordan, to Ken Chenault (American Express), to Mark Cuban (Dallas Mavericks), to Jim Skinner (McDonald’s), to Tommy Lasorda, to Larry Page, and Sergey Brin (Google), to Bono, to Rupert and Wendi Murdoch, to Mayor Michael Bloomberg, to New York Governor David Patterson, to Louisiana Governor Bobby Jindal, to New Mexico Governor Bill Richardson, to Craig Barrett (Intel)………my heart skips a beat just looking at this list.
There are too many names to mention and one just as memorable as the other. I have learned so much, achieved two MBAs in one year and have had the opportunity to meet and work with some of the best people in the world.
I will not forget the man who wrote a book about how Starbucks saved his life, the Naked Cowboy, the head of the Port of New Orleans who told me personal stories about what it was like growing up in the Gulf of Mexico during hurricane season, to the head of the Army Corp of Engineers who looked after me and my crew while we reported during Hurricane Gustav, to the chefs at McDonald’s headquarters who let me experiment on my egg-white wrap sandwich, to the lovely man in Davos who gave Jill, Lorie and I a home when we thought we were going to be homeless at the World Economic Forum. So many wonderful memories to cherish!
One of the things that I don’t talk enough about is the people who make all of this possible. I work with some of the most extraordinary and dedicated people who work tirelessly to book the guests, get the show on the air every day and make sure that the cameras turn on and the satellites don’t fail. Yvette, with whom I couldn’t live without; Brian, my other half; Pippa, Lindsay and Karen, my Charlie’s Angels; Andy ,who reads my mind; Lisa, who rocks my world; Frangie, Hirst and Gold who make me look good every day by feeding me every wire as news breaks throughout the morning; Michael, who never says no when I ask for the impossible; Saralyn, who never forgets that Diet Coke, tea and mini muffins are the key to my heart; Lauren, Kathryn and Ray whom I drive nuts with this blog; and Melissa, who sits next to me day in and day out when I think I’m about to lose my marbles and without whom my life would have no order.
The list goes on and on……from Nat, the floor director in studio with me every day; to Frank, Jack and Bookman who make me smile while looking in the camera; to Chris and Bizmark who take me from 4 a.m. bedhead sessions to glamazon; to Jenna, Charles, Peter, Robert, Connell, Lieberman, Ashley and the members of the FBN team who make going to work each and every day a joy and a privilege. Nothing is possible without the entire FBN team. Nor is it possible to remain as connected and in the know without the countless resources, friends, colleagues and repeat guests who help make each and every one of us smarter every day by sharing their thoughts, research and analysis.
I know we only have one year under our belts, that the competition is stiff and that we have a lot of room for improvement; but if the next year or next decade is just as fun and groundbreaking as the first one, it will be the journey of a lifetime.
Thank YOU for watching us and thank YOU for reading this blog. Nothing makes me happier than hearing from YOU. Please continue to email us, comment on this blog and give us the advice and guidance that will help us address the issues that concern you each day. Together we will get smarter, ask tougher questions, demand answers and test the boundaries.
October 14, 2008 5:43PM
By Alexis Glick
It has been several days since I posted my last blog entry. For days, if not weeks, I have created titles for blogs that I intended to post or written pieces of blogs and failed to post them. If you look at the origins of the Glick Report dating back to early January when I took my first trip to Davos, Switzerland, this blog was about the behind the scenes look at the financial world, the television world and about some of the personal highs and lows that I experienced.
Somewhere along the way I pulled back on the personal stories, switched gears and made this blog a forum for how this financial crisis started, ways to address it and the risks to our economy. I have absolutely no regrets about doing that. In fact, I am thrilled that this blog has become a place to debate the issues that matter most to us as we approach this historically important election.
I have never been more glued to a political election than I have been to this one. Perhaps it is because the stakes are so high; perhaps because I want answers; perhaps because I yearn for unity as opposed to polarization in this country. Somehow, I find myself longing for the days post 9/11 when the American people collectively decided that no one could defeat the American spirit. Now, I see a country pointing fingers, angry about what happened to the companies and the executives who ran their businesses and demanding answers as well they should. Now I see the campaigns attacking one another in a way that they told us they wouldn’t do. Remember when we were told that a McCain vs. Obama election would be constructive as opposed to destructive? Look at what is happening now. Is this what we want? Is this what we need at a time like this? Is this politics as usual? Perhaps, but can we afford it?!
One week ago Friday, my grandmother died. I was anchoring The Opening Bell, saw my dad’s number on the caller ID and knew something had to be very wrong. On set, BusinessWeek was observing my show. Ironically, I had just broken one of the bigger stories about Citigroup’s exclusive agreement with Wachovia in the face of a Wells Fargo bid. The headlines were crossing, every wire citing Fox Business Network. Wells Fargo was hosting a conference call and analysts were asking Kovacevich, the head of Wells Fargo, if FBN was correct about an exclusivity agreement between Citigroup and Wachovia Bank and if he was aware of it. It was one of those mornings where fear and anger took center stage as we waited for the House to vote on the $700 billion rescue plan for the second time. I was as busy as I ever have been.
Growing up, I was very fortunate to have six grandparents. My parents divorced when I was little and my dad remarried while I was very young, so I had the added benefit of six grandparents watching over me. Grandma Pastore’s loss is particularly difficult. She had a way about her. She approached life with such grace and elegance. She believed in the very best in everyone she met. I can’t remember a single moment in my entire life when she didn’t have something good to say about something or someone.
Though Grandma prayed to St. Anthony and other well-known saints, she embodied the qualities of one herself.
I looked up the definition of ’saint’ on the morning of her funeral. A person of great holiness, virtue, or benevolence. I couldn’t think of a better way to describe her. She was my biggest fan and repeatedly told our family that someday I would be the next Katie Couric. You could imagine her great joy when I got the opportunity to sit next to Katie for a year co-anchoring the third hour of the Today Show. She was kvelling!
It has taken me time to post this blog, but I couldn’t let this moment pass. In the frenzy of these markets and difficult times for all of us, milestones have been made. My oldest son Logan started first grade, my second son Kyle turned 5 and my baby Slate started a toddler program at our nursery school. This past weekend, I celebrated my 9th wedding anniversary with my husband.
In the past five or six weeks, I have had the opportunity of a lifetime to appear on multiple shows and networks to help digest the complexity of this financial crisis. From The View to Good Morning America to the CBS Early Show to Don Imus’s radioshow to Barbara Walter’s Sirrius Satellite Radio Show to O’Reilly to Studio B with Sheperd Smith and many other terrific programs. It has been a whirlwind.
Along the way friends and colleagues have said, “I don’t know how you do it” — implying how I juggle three little boys , 4 a.m. wake up calls, all day and all night television appearances on top of the rest of my day-to-day responsibilities.I can “do it,” because of my husband Oren. When people talk about finding your mate, your partner, I thank God every day for blessing me with the most supportive husband. At times like these, we all need a little love and prayers. Mine come in the form of four men that I could not live without.
And a lot of help from Grandma. I can feel her prayers as we speak.
October 8, 2008 1:30PM
By Alexis Glick
Are we behaving rationally? Is what we are seeing the normal unwinding of risk? How much more fear do we need to see for markets to stabilize?
The questions are pouring in. The answers are all over the map. If one more person says the sky is falling, I am going to lose my mind. Believe me, I have been bearish and noted it many months ago on this blog, but we need to start talking constructively. I am now on the borderline of anger. There is no pill that we can swallow that will fix this problem in hours or days. You cannot unwind trillions of assets and not experience a correction. Let’s listen to the experts, but let’s also look at historical data. I am no expert, but I did spend eight years on a trading floor trading hundreds of millions of dollars. When sentiment shifts this aggressively in one direction, markets correct themselves. This doesn’t mean we are going to have a huge rally and all will be fine. The markets have already almost corrected 40%. The average correction for the major indices during a market correction, recession or bubble bursting is 40%. At one point, do we stand up and say enough is enough?! People keep telling me we haven’t hit a point of capitulation yet, but is the market functioning normally? Didn’t we prevent short-selling in a little less than 1,000 financial companies? In aggregate, those stocks are down north of 16%, probably 18% as we speak. What did that do? It wiped out long, short portfolios from trading in this market, largely hedge funds. It prevented short covering activity and it caused mass hysteria in the credit default swap market because short-sellers had to look for other places to make negative bets.
We need to look at the functionality and rationality by which we look at these markets. Where is the Uptick Rule? Short selling in financials expires at midnight tonight. What will that do to the market when short-sellers return? Will it be as catastrophic as everyone expects? Do away with naked short selling. Yes. Bring back the Uptick Rule. Yes. Create circuit breakers in individual stocks as opposed to 1,200 point declines. Yes. We need to look at the structure of the markets. Capitulation may NOT occur this time around. This correction started 18 months ago. This started in the winter of 2007, March of 2007 to be exact. On average, cycles like this last two years. Could this one last longer? Sure. We are in the eye of the storm. If a hurricane is flying through the Gulf of Mexico and the weather authorities say it’s a Category 2 or 3, that’s a guesstimate based on the path of the storm at that moment. The hurricane has just made landfall. It was a Category 5. The Federal response and preparedness is there. Was it as aggressive or as prepared as it should have been? No. When the eye of the storm hits, people take shelter and they run. What happens when the storm passes? You step out of the shelter and you see the sun. You assess the damage and you rebuild. How long does that rebuilding take? It takes TIME. This is the United States of America, the largest economy in the world, the largest importer and exporter in the world with a currency that is rallying in the face of this financial crisis.
I am not a financial expert. I am frustrated like so many of you. I want answers. I want a regulatory framework that will deal with these issues in the future. I want a real resolution to this housing crisis. If Paulson is correct, housing caused this problem and housing will need to help cure it. Where is our resolution to housing? So far the announcements out of the Treasury and the Fed have done little to calm the markets fears. We need to go back to the drawing board and think about some of the cures. Perhaps we need to look at what Axel Merk said and recapitalize the financial institutions. Perhaps we need to tell them that when we recapitalize them, they have to guarantee that a certain percentage of the money will be used toward lending. Maybe as Ed Yardeni points out, purchasing and resetting mortgages is a lot less costly than we think? Look at the Treasury auctions this morning. Signs of life? Maybe? Fannie Mae’s T-bill auction results were better. The 3 month T-bill was down 80 basis points over last weeks 1.55% yield. Two weeks ago the rate was 2.95%. The 6-month rate was 1.84%, down from 3.19% a week ago and 3.40% 2 weeks ago.
This morning, some of the brightest minds joined me to talk about the coordinated emergency rate cut: Daniel Shaffer with Shaffer Asset Management who sat on my show in July and said the S&P was going to 1060 and the Dow to 8600 to 9600; Jeff Sachs, a world renowned economist and director of the Earth Institute at Columbia University who has repeatedly named one of the most influential people in the world; Raghavan Seetharaman, the CEO of Doha Bank, one of the biggest in Qatar. Why does he feel more sovereign wealth funds will buy on U.S. weakness? Why is he starting to consider purchasing a U.S. bank as opposed to purchasing a bank in the emerging markets like Brazil?
Watch the videos and find out.
October 7, 2008 12:39PM
By Alexis Glick
“I know people are scared watching the markets unravel. Don’t panic. That is the worst thing that you could do in a market like this. Think about it. How often do you look at your 401k statements in a good market? Don’t make quick decisions when those decisions are based on fear. Time horizons are different for different people. For some this market will present opportunities of a lifetime. For some this will mean working longer and putting off retirement. It is difficult to see what is happening and to open up those statements but don’t rush to sell everything. The key is to remain diversified. You may think that you are already diversified but you may not be if one part of your portfolio has sold off more aggressively than another. You may become too heavily weighted in one asset or industry. Do your homework, talk to an advisor and remember this too shall pass. We will not fix decades of overspending, a housing bubble and credit bubble in weeks or months. This de-leveraging process has been going on for a year now and it may take another 6 months to a year but I suspect we will be in a much better place a year from now. History has not failed us. I don’t buy into those who believe this will be another Great Depression. Finally, if things were so bad, then why is it that the FDIC, which insures your deposits at banks, has not lost one dime of your money while the largest bank failures in history have occurred.”
I wrote this entry for the Buzzboard@TheDailyBeast.com. It’s Tina Brown’s Web site. Over the past couple of weeks and days people have been calling or stopping me on the street asking me what to do. I am not a financial advisor and it pains me to see the look on people’s faces. I have heard countless stories of people saying I sold everything because I couldn’t take it anymore. I couldn’t sleep at night knowing what tomorrow would bring. The problem in this case is not easily fixed. We have talked about this on this blog. The rescue plan was not the pill that could heal the patient. The rescue plan was one approach to fixing the financial institutions that we need to remain healthy so that we, companies, municipalities on the state and local level, the consumer and other financial institutions could get access to credit. CASH! What we are experiencing is unprecedented in many ways. I hear myself on my morning programs repeating the words historic, unprecedented, fasten your seatbelts, every day now. I have never experienced anything like this and I am sure many of you have not either.
Here is what I do know. The facts. The facts are both good and bad. We just took part in the biggest bull market in U.S. History for home prices. For 30 consecutive years home prices increased year over year. We bought bigger homes, got home equity lines of credit on the cheap to make home improvements, used our credit cards like they were cash and had access to unprecedented levels of credit. There I go again J! To change our habits, to cut our budgets, to stop pulling money out of the piggy bank that was our home is not only sobering but painful. We cannot adjust to the psychological change that this requires overnight. People are still going to get loans just as they are right now. The only difference is that a 620 FICO score will no longer do. A minimum of 720 with a strong income and debt to equity ratio will be essential. FICO scores if you are not familiar with the term, help lenders determine your credit worthiness by gathering data from credit agencies. Did you know that 27% of the nation has a 750-799 credit score and that 13% have a score above 800? That’s pretty impressive. Only 15% have a score below 600. I am not saying this means access and availability to credit will be easy but it also doesn’t mean that we should assume that the world is coming to an end.
Just moments ago a friend of mine sent me a report from Merrill Lynch whose title was “The Frugal Future.” Ironically, it illustrates a lot of what I mentioned above. One of the key messages in the report is the level to which banks are hoarding cash. That right there is our biggest problem right now, a lack of confidence. If banks are not willing to lend to one another, then why would they lend to other businesses? If we can cure this patient buy allowing a doctor to prescribe a prescription that begins to heal those wounds, maybe we could fix this problem. That doctor is the Fed. Don’t assume that everything we are seeing has not been seen before. Yes, there are a lot of firsts but there are also examples that we can look at in history and learn from. Did you know that the degree to which bank credit has contracted is the same level that we saw in 1999 and in 2002? When the Resolution Trust Corporation was unveiled in August of 1989 to address failed assets at many of the savings and loan companies, the market did not bottom out until October of 1990. From there the market had an enormous rally. We are one year into this mess, maybe more like 18 months. Don’t forget context!
One last statistic that I found in this Merrill Lynch report worth noting is this, the U.S. Debt-to-Income Ratio rose as much in the past 7 years as it did in the previous 39 years. Think about that. We have to make some difficult choices and do some things that we don’t want to do. First, we need to bring confidence back to the markets. Who can do that? I hope the Federal Reserve Chairman can. I’d like to see one of the Presidential candidates do that tonight. I want someone to take ownership and lead us through difficult times by giving us the honesty when we need it but also by giving us a path. Right now we have no path, we see no end in site, we have no assurances when this will end but the economy cures itself and in this case divine intervention is necessary. Two, a stong dollar could begin to make U.S. assets more attractive. Europe is behind us and as a result their currencies are now devaluing. Three, is anyone saying amen to where oil prices are? Even if it is short term, let’s not lose site of the fact that oil is trading below $90 dollars a barrel. This will be a blessing in disguise for all of us. Don’t forget this was the financial Armageddon this summer. Now it will be cheaper to fill up your gas tank at the pump, to buy food, to ship goods, to export, you name it. This is a great story. Finally, corporations will be forced to make cuts and come clean. It doesn’t mean every company will cut jobs, it means companies will be forced to make difficult decisions and get back to the core message or business that we were meant to be in. How many businesses are now in the cross hairs of this financial mess because they saw get rich schemes and they went off track? If you’re an insurance company, stick to insurance. If you’re an industrial company, stick to making products and innovating with new technology. If you’re a bank, don’t become a hedge fund, be in the business of collecting deposits and lending money. It’s time to get back to the days where we knew what a company stood for.
October 2, 2008 2:04PM
By Alexis Glick
We have talked a lot about this rescue plan or bailout depending on what you call it and I have received a lot of visibly angry comments from some of you. First of all, I am thrilled that you are speaking out and offering options. This is everyone’s opportunity to speak their peace before this bill passes or fails.
On my last blog about the plan, I brought you one alternative from Richard Stuttmeier at ValuEngine. Now I bring you another plan from Axel Merk, the president and portfolio manager of Merk Investments. He is not happy with the current plan on the Hill and feels the minds behind this plan have missed the point.
He thinks an injection of capital into financial institutions would be far more effective. He is critical of Congress and fears there are more prudent ways to use our money. He is concerned that this won’t work and that there will have to be a second phase to this plan. Not good!
He also has some interesting points on what the Federal Reserve Bank is doing and why their interest rate moves and policy may not be helping achieve the desired effect.
Look at what he says needs to happen and why he thinks we are now missing the bigger picture, the consumer.
