Wall Street Reorg: Impact on Real Estate?
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of…
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of America for close to $50 billion. Meanwhile, questions about giant insurer AIG’s ability to weather its own set of mortgage-related problems continued to mount. My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen, said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration. The big question is whether these moves will increase investor unease or, by removing a few of the major question marks, hasten its recovery. The same can be said for the local real estate market. While many of Merrill’s remaining 60,000 employees will undoubtably be kept on, the same can’t be said for Lehman’s workforce of 25,000; on the other hand, market’s hate uncertainty, and maybe this just helps ensure that New York market is on target to meet Jim Cramer’s projected turnaround date of June 30, 2009.
Two Major Wall Street Banks Falter [NY Times]
Crisis on Wall Street [WSJ]
Photo by huachen
Nice, discussion, everyone. Any of you have any real insight as to where treasuries and/or mortgage rates end up, and whether and how much further lenders will tighten up on credit requirements or loan to value? Will rate drops make financing/refinancing more attractive, or will credit tighten up so much that low rates will be irrelevant as a practical matter?
“today would be a good day to realize some stock losses”
dave — seriously, wait til an up day. Don’t realize losses on a panic day unless you think this marks the beginning of a serious downtrend. There is plenty of time between now and Dec. for a tax sale.
“What am I missing?”
Washington Mutual, AIG, Morgan Stanley, Goldman Sachs, Wachovia, hedge fund collapses, regional bank failures, finding out if the FDIC really has enough funds on hand to cover all the insured depositors.
So far we really seem to be holding on pretty well. It’s 11AM and the Dow is down less than 2% (and off its lows for the morning). Not that I’m wishing for it, but where is the real capitulation? If this is the worst of it, I’d say we all got very lucky. What am I missing?
“I have no idea where the bottom will ultimately be”
What better baramoter than the change in the NY Metro S&P Case-Shiller Index approaching zero on a year-over-year basis? It would have worked last bottom. It moved in the direction of zero (slower price drop) after the last reading. Rhetorical question: What will it do for the rest of the year?
thats what i was talking about…use another instrument and its not a wash sale.
Whoa Dave, careful: make sure you talk to a tax advisor before trying to do something that sounds like a wash sale (sell and buy at same time just to lock in tax loss without changing economic position).
If any of you have a profit from a real estate sale, today would be a good day to realize some stock losses to mark against the profit for tax purposes. With the number of ETFs and everything, you can buy something similar back right away.
Wasder, I would guess the process (that being real price declines) will be underway quite shortly, if it is not already. Of course I have no idea where the bottom will ultimately be. My investing philosophy, which has served me well, can be summed up as: “I can call a top. I can’t call a bottom. Long-term price trend will be up.” So just for example I liquidated everthing into cash in January-May 2007, and started slowly putting it back in the market over the past few months. I just dropped another $10k into the market on Friday afternoon (in hindsight it would have been nice to wait until today, but whatever).
“Some of them are actually able to wait out the next 5 or 10 years”
I agree with lechacal @ 10:33. Just because you’re able doesn’t mean it is wise to do so. I don’t agree with the “long haul” arguement. It hinges on 2006 prices to return within one’s lifetime. If you’re fooled by nominal prices changes and don’t appreciate the time-value of money, then I guess the “long haul” has a placebo effect. I believe that most homeowners, at least the ones who are still ahead, count their equity as their wealth and will want to REALIZE it (i.e. take profits and cash out) before it’s too late.