Category: the Thread

Deals
by

Kelli B. Grant
(Author Archive) (Smartmoney.com)

Most consumers could use a little financial handholding these days.

NEW YORK (CNNMoney.com) — With thousands of stores closing in the economic downturn, the increase in empty space at the nation’s shopping malls is leaving a hole in the hearts of once-vibrant communities. With one-quarter or more of some shopping centers empty, the decline – or even the demise – of a mall can have a devastating economic effect…

As for the Tapestry, it is ONLY the signal that now is getting ready to be the time for us to get into a building and into a lease that will be a blessing for many years.

We waited and played this whole thing the way we needed to in order to position ourselves for this current market. Let’s pray and see what GOD can do about allowing us to continue to get our roots firmly in the ground!

GO JESUS!

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6 – August 2008 – Talked BAI into taking me full time and they gave a raise.
7 – August 2008 – had tough talks with leaders, ministry friends and family to position for plans.
8 – August 2008 – changed banks and setup Schwab bank in July.
9 – September and October – re-entered all cash into stock. Positioning for a return.
10 – Placed offer on bank owned house.
and in all of this, I have MADE MONEY and SAVED MONEY. I waited, prayed and trusted in God! He takes from the wicked and gives to the good!

This is a short account of the crazy steps God has made me take:
1 – October 2005 – would not by a house and realtor told me I was crazy when I said I would get it cheaper!
2 – May 2006 – reworked my credit report for a house later.
3 – September 2006 – I pulled all our investments out of stock and put in cash for a market deflation.
4 – June 2008 – Took half my retirement and paid off debts, making loans to myself.
5 – August 2008 – talked church into taking me part time.
more on next post…

The more I take moments to sit and think, the more I allow myself space, praying, resting, watching, waiting, the more I feel myself deeply fall in love with Jesus.

Today things are different and will never truly be the same. I have seen opportunities and seized them with a zeal that is not my normal personality. I have seen and operated in Kingdom mindset and in this era of change and loss, I have found growth and gain!

I will share the crazy steps I have taken in my next post.

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Crashes, Like Bubbles, Call for a Level Head

What’s the inverse of a bubble? A panic.

That realization dawned on me last week as I watched otherwise rational people frantically selling stocks at any price. This was a panic, no doubt about it. But its uncanny resemblance to a bubble in all ways but the result may have struck me because the last bubble was so recent. Just this summer, I was examining the bubble psychology in oil and commodity prices. When I re-read what I had written, the comparison was striking. The following passage is word-for-word exactly the same as I wrote in my column of July 24, except that I have substituted the word “panic” for “bubble”, “margin buyers” for “short sellers” and “pessimism” for “optimism,” etc.:

“What defines a panic? …it starts with a development of far-reaching, perhaps unknowable, implications, like the collapse of mortgage backed securities. Opinion may be sharply divided between optimists and pessimists, but pessimists get the upper hand, driving prices lower. Margin buyers (optimists) get squeezed and are forced to cover, retreating to the sidelines. With pessimism unchecked and selling reinforced by ever falling prices, stock values become detached from any rational criteria. Trading
volume surges. Eventually, pessimism runs its course, prices turn up, and people step in to buy. Then prices surge.”

A difference, of course, is the predominant emotion, which is fear in a panic, greed in a bubble. Psychologists tell us fear is a more powerful emotion than greed. If last week is any indication, I’m sure it’s a less pleasant one.

As the Nasdaq was plunging last Wednesday through my latest buying target of 1750 with once unthinkable speed — it had crossed the previous target, 2025, just a week earlier — it occurred to me how wildly irrational the pace of this decline had become. What had actually changed in just a week? Not that much, when you think about it. The amount of toxic assets on the books of the world’s financial institutions was precisely what it had been a week before. Some European banks had wavered and had to be rescued. But none had failed. Governments were rushing to address an array of potential problems, which should have been, if anything, positive news for equities. But what were commentators comparing things to? The Great Depression
, which I once read was the worst economic contraction since the Black Death.

Suddenly everyone was speaking with certainty about dire consequences that simply can’t be foreseen. Just as in a bubble, price/earnings ratios were now irrelevant, because earnings were going to be so much lower than forecast. (In a bubble they’re going to be higher.) People were saying confidently that the Dow Jones Industrial Average was going to 6,000. (It was 20,000 in the bubble.) And of course, everyone was talking about how they’d just bailed out before the crash.

Except me. I haven’t sold a thing. Last Thursday, during a break in a college trustees meeting I was attending in the Midwest, I phoned in my buy order. The Nasdaq Composite Index was well below 1750. A beauty of my system is that it’s very easy to execute.

I didn’t need to waste much time thinking about what to buy. Everything was beaten down. There didn’t seem to be any point in stock-picking. As I’ve said before, at a time like this what you buy is less important than that you buy something. I divided my purchases evenly among four exchange-traded funds — SPDR Trust (SPY: 93.51*, -6.30, -6.31%), PowerShares QQQ Trust (QQQQ: 31.70*, -1.86, -5.54%), iShares MSCI Emerging Markets Index (EEM: 25.43*, -3.21, -11.20%) and iShares MSCI EAFE Index (EFA: 44.50*, -3.60, -7.48%) — pretty much spreading my money around the entire globe.

Stocks seemed to be making an attempt at steadying themselves that day. Then, in the last 20 minutes of trading, they went into another sickening plunge. I heard that people trying to buy or sell then couldn’t place orders. I was starting to feel a little kicked around. The next morning the Dow opened down more than 500. Would we be facing another 10% drop in just days? I stopped looking.

Friday marked the end of one of the worst weeks in Wall Street history. Then, after a beautiful autumn weekend in the Northeast, a new day dawned on Monday. Stocks soared above my buying target, putting my recent purchases in the black. The rampant pessimism, it seemed, had run its course at least for now, just like the optimism in a bubble. Have we hit bottom? There’s no way of knowing. All I can say is that historically stocks have outperformed every other investment category if held for the long term. Nothing in the recent past has convinced me otherwise.

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It’s an historic day when the US begins measures that will not be easily undone. The CEO’s from all the nation’s major banks in one room make an unprecedented decision, let’s take the money and run…

WASHINGTON (Dow Jones) — On one side of the table sat U.S. Treasury Secretary Henry Paulson, flanked by Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair.

On the other side sat the nation’s top bank executives who had flown in from around the country, lined up in alphabetical order by bank, with Bank of America Corp. at one end of the table and Wells Fargo & Co. at another.

It was Monday afternoon at 3 p.m. at the Treasury headquarters. Messrs. Paulson and Bernanke had called one of the most important gatherings of bankers in American history. For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions over executive pay and dividend policies.

The participants, among the nation’s best deal makers, were in a peculiar position. They weren’t allowed to negotiate. Mr. Paulson requested that each of them sign. It was for their own good and the good of the country, he said, according to a person in the room.

During the discussion, the most animated response came from Wells Fargo Chairman Richard Kovacevich, say people present. Why was this necessary? he asked. Why did the government need to buy stakes in these banks?

Morgan Stanley Chief Executive John Mack, whose company was among the most vulnerable in the group to the swirling financial crisis, quickly signed.

Bank of America’s Kenneth Lewis acknowledged the obvious, that everyone at the table would participate. “Any one of us who doesn’t have a healthy fear of the unknown isn’t paying attention,” he said.

This account is based on interviews with participants, government officials and banking-industry executives.

Regulators had spent the weekend crashing out their latest strategy to restore confidence to America’s battered banking system. As stock markets tumbled last week and foreign governments began taking dramatic steps, U.S. officials coalesced around a plan that would include guaranteeing bank debt and a big capital injection. Policy makers wanted to deliver a “confidence shock,” one participant said.

Treasury and government officials held multiple meetings and conference calls on Saturday. Dozens of officials gathered at Treasury’s headquarters Sunday morning and stayed into the evening, lunching on sandwiches from Potbelly Sandwich Works.

They kept coming back to the same question: Is the plan too sweeping? Policy makers knew they were taking unprecedented steps. It would take years to disentangle banks from the federal government. Some of these temporary steps would be hard to undo.

Policy makers debated how the government’s capital injections should be structured, especially the question of the dividend banks would pay. Make it too high, and that risked draining firms of needed funds and scaring off other potential rescue recipients. Make it too low, and taxpayers wouldn’t be compensated for their risk. Another challenge: Inject capital without scaring away private investors.

A final deal between regulators was hashed out in Mr. Paulson’s office Sunday afternoon. For Mr. Paulson, who had spent a career as an investment banker, the decision marked a reversal. Just weeks earlier, he had said that injecting capital directly into banks would appear to be a sign of “failure.”

The top bankers were then told to show up for a meeting Monday at 3 p.m., but were given few details. Expecting an uproar over the plan, government officials secretly planned to break off the first meeting, giving CEOs time to vent, talk to their boards, clear their heads, and reconvene at 6:30 p.m.

In Mr. Paulson’s call with Morgan Stanley’s Mr. Mack, people familiar with the matter say, the CEO asked the Treasury Secretary the reason for the meeting. Mr. Paulson responded: “Come on down, we’ll tell everyone at the same time,” adding, “I think you’ll be pleased.”

Also at the 3 p.m. gathering was New York Fed President Timothy Geithner, along with Fed governor Kevin Warsh and Comptroller of the Currency John Dugan. Behind them were lawyers and staff. The meeting took place in the Treasury secretary’s conference room, which faces a courtyard and is outfitted with mahogany chairs, antique wall sconces and chandeliers.

It struck some of those in the room as fortunate that Citigroup Inc. and Wells Fargo are so far apart in the alphabet. The two firms just last week were locked in a bitter battle over control of banking giant Wachovia Corp., a fight Wells Fargo eventually won. Citigroup is still seeking billions of dollars from Wells Fargo in damages for swooping in on the Citigroup deal after regulators had already blessed it. With the firms sitting alphabetically, at least the heads of the two rivals, Mr. Kovacevich and Citigroup Chief Executive Vikram Pandit, wouldn’t have to sit next to each other.

Mr. Paulson, in his rapid staccato, said the public had lost confidence in the banking system, despite each banker’s view of his institution.

“The system needs more money, and all of you will be better off if there’s more capital in the system,” Mr. Paulson told the bankers.

Mr. Bernanke said the situation was the worst the country had endured since the Great Depression. He said action was for the collective good, an understated appeal. The room was silent as he described the economy’s fragile condition.

Mr. Geithner, whose job as New York Fed chief makes him the central bank’s main man on Wall Street, delivered the most sobering news. He went around the table and described how much preferred stock the government was going to buy from each firm. The government would take $25 billion in Citigroup, $10 billion in Goldman Sachs Group Inc., and so on.

The CEOs shot off questions, peppering officials for details about how the share purchases would be structured and how it might constrain them. At one tense moment, Mr. Bernanke jumped in to calm nerves. The meeting didn’t need to be confrontational, he said, describing paralysis in the market and the threat that posed to everyone in the room.

U.S. officials argued the plan represented a good deal for the banks: The government would be buying preferred shares, and thus wouldn’t dilute their common shareholders. And the banks would pay a relatively modest 5% in annual dividend payments.

The meeting ended at about 4 p.m. By 6:30 p.m., all of the sheets had been turned in and signed by the CEOs. No second meeting was held.

— Damian Paletta, Jon Hilsenrath and Deborah Solomon, The Wall Street Journal

(Michael M. Phillips, Aaron Lucchetti and Dan Fitzpatrick contributed to this article.)

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I had a long day today. I had to work extra but the cool thing is that I got my first paycheck with my latest raise. This is going to set us up to totally get our house! I have to work Saturday, but it’s cool because I am getting to start working assisting the planners and making trades! God is good. I am getting to really make some distance again! It is time for the church to rise up, work hard and advance the Kingdom!

When the financial crisis lifts, a bleak job market will need some overdue attention.

My favorite part of this story is the excerpt I have added below. It is interesting how we are now looking back at our activity in the US and seeing TRUTH. The truth is that we have been GREEDY and CONSUMERISTIC. I believe that the church is just as responsible for this kind of consumerism as anyone and those of us who are thrifty, slow to act, balanced and careful with life and the actions we make, living in such a way as to GIVE BACK to the rest of the world and our neighbor will be the kind of Christian that the rest of the world will one day want to be like.

Read the following excerpt to see what I mean:

“The employment picture is deteriorating rapidly. The United States has lost 760,000 jobs in the past nine months, according to the Bureau of Labor Statistics, while weekly initial jobless claims have hit a recent 478,000 from the low 300,000 range in early 2007.

Those are numbers that go hand-in-hand with recessions, noted Northern Trust economist Asha Bangalore. “Projections of weak economic growth,” she added, “suggest that a higher level of jobless claims in the months ahead is nearly certain.”

In fact Microsoft (MSFT, Fortune 500) founder Bill Gates said Monday he believes the unemployment rate could hit 9%, up from 6.1%. Any substantial rise in joblessness will put more pressure on house prices and further undermine the mortgage markets that governments around the world are trying desperately to shore up.
After the binge

The economic stumbles come after a debt-fueled consumption binge tied to the surge of house prices in the first half of this decade. Consumer spending as a proportion of gross domestic product rose to 71% in 2005 and 2006 from less than 65% in 1980 and a 25-year average of 68%, according to Royal Bank of Scotland data.

To finance that spending, consumers and businesses took advantage of former Fed chief Alan Greenspan’s expansionary monetary policy and borrowed heavily, laying the groundwork for a massive expansion of the financial sector. Low interest rates, together with deregulation, allowed the likes of now-defunct Lehman Brothers and Bear Stearns to post record profits and ply top staff with multimillion-dollar bonuses.

But outside the booming financial sector, job growth was soft and wages were stagnant. The median U.S. family’s income was actually a shade lower in 2007 than it was at the end of the high-tech boom of the 1990s, according to census bureau data.

“Since 2000, a lot of economic growth has been illusory,” said Len Blum, a managing director at investment bank Westwood Capital. “Now that the asset bubbles have been popped, you start to realize we really didn’t make that much progress in our economy.”

Indeed, consumer outlays are now falling, as households try to work off their debts. Along with the surge in mortgage delinquencies that precipitated the financial crisis, the spending slowdown is also taking a toll on employment.

What’s more, the news in the job market seems to worsen by the day. General Motors (GM, Fortune 500) said Monday it will close plants in Wisconsin and Michigan, costing 2,500 jobs. Financial firms have cut 65,000 workers in 2008, as the so-called shadow banking system has cratered, forcing the feds to cough up billions in bailout cash for the likes of Fannie Mae (FNM, Fortune 500), AIG (AIG, Fortune 500) and others.”

Click below for the rest of the article at cnn.com

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