Dow plunges 679 to fall to lowest level in 5 years

NEW YORK – Stocks plunged in the final hour of trading Thursday, sending the Dow Jones industrial average down 679 points – more than 7 percent – to its lowest level in five years after a major credit ratings agency said it might cut its rating on General Motors Corp.

The Standard & Poor’s 500 index also fell more than 7 percent.

The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,198 on Oct. 9, 2007. The S&P 500, meanwhile, is off 655 points, or 41.9 percent, since recording its high of 1,565.15.

U.S. stock market paper losses totaled $872 billion Thursday and the value of shares overall has tumbled a stunning $8.33 trillion since last year’s high. That’s based on preliminary figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies’ stocks and represents almost all stocks traded in America.

Read moreDow plunges 679 to fall to lowest level in 5 years

U.S. Treasury May Buy Stakes in Banks Within Weeks

Oct. 9 (Bloomberg) — The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.

Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.

The move would be a shift in emphasis in Paulson’s original intention for the $700 billion bailout package passed by Congress last week. While the Treasury still aims to buy troubled mortgage-backed securities from financial institutions, a direct capital injection would offer more immediate relief by giving banks quick access to funds they could then lend out.

“The Treasury is no longer looking for one silver bullet,” said Steve Bartlett, president of the Financial Services Roundtable, which represents 100 of the biggest firms in the industry. “They have to proceed on all fronts.”

Read moreU.S. Treasury May Buy Stakes in Banks Within Weeks

Dollar May Get `Crushed’ as Traders Weigh Up Bailout


U.S. one dollar bills are displayed for a photograph in New York, April 15, 2008. Photographer: Daniel Acker/Bloomberg News

Sept. 22 (Bloomberg) — Treasury Secretary Henry Paulson‘s plan to end the rout in U.S. financial markets may derail the dollar’s three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

``As we get to the other side of this, the dollar will get crushed,” said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world’s biggest currency hedge-fund firm, which manages about $15 billion.

Read moreDollar May Get `Crushed’ as Traders Weigh Up Bailout

Goldman Sachs, Morgan Stanley Become Banks, Ending an Era for Wall Street


U.S. flags fly outside the headquarters of Goldman Sachs Group Inc., in New York, Sept. 16, 2008. Photographer: Gino Domenico/Bloomberg News

Sept. 22 (Bloomberg) — The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken.

The Federal Reserve’s approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.

“The decision marks the end of Wall Street as we have known it,” said William Isaac, a former chairman of the Federal Deposit Insurance Corp. “It’s too bad.”

Goldman, whose alumni include Henry Paulson, the Treasury secretary presiding over a $700 billion bank bailout, and Morgan Stanley, a product of the 1933 Glass-Steagall Act that cleaved investment and commercial banks, insisted they didn’t need to change course, even as their shares plunged and their borrowing costs soared last week.

Read moreGoldman Sachs, Morgan Stanley Become Banks, Ending an Era for Wall Street

Lehman posts $4 billion quarterly loss, plans sales

NEW YORK (Reuters) – Lehman Brothers Holdings Inc plans to sell a majority stake in its asset management unit and spin off commercial real estate holdings, hoping to restore investor confidence and ensure its survival after reporting a record quarterly loss of about $4 billion.

Shares failed to rebound on Wednesday morning after plunging 45 percent a day earlier, reflecting Wall Street disappointment that Lehman did not announce more concrete actions.

Read moreLehman posts $4 billion quarterly loss, plans sales

Lehman sinks as much as 40 percent on capital worry

NEW YORK (Reuters) – Lehman Brothers Holdings Inc shares sank as much as 40 percent Tuesday on concern that talks on a possible investment from Korea Development Bank had broken down and that the fourth-largest Wall Street investment bank would be unable to raise needed capital.

Read moreLehman sinks as much as 40 percent on capital worry

The Disconnect Between Supply and Demand in Gold & Silver Markets

There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver.  Indian shops are empty of both silver and gold. Even the Indian banks don’t have any gold or silver.  The big western bullion banks, based in New York and London, control both the gold and silver trade.  Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal. Normally, if a banker’s bank knows that its customer-bank has firm orders, it would extend the smaller bank a bigger line of credit.  Not now.

By refusing to extend lines of credit, the big bullion banks are essentially rationing a very thin supply.  Most physical silver, for example, is being reserved for industrial and fabrication use, and investors are simply not able to get any, without waiting for months.  Investor oriented shops are bare, and the U.S. Mint has suspended coin production.  All available supply seems to be reserved for industrial users.  You cannot substitute paper claims for real silver, in industrial use, because paper doesn’t have the physical properties of silver.  So, it seems that all available supply is being diverted to industrial users, and, to a lesser extent, aside from the squeeze on lines of credit, also to jewelry fabricators.  But, investors are left out in the cold.  They can accept paper claims, or nothing.  The most interesting mistake that the manipulators have made is in not supplying the U.S. Mint, which has run out of silver, proving that there is a severe shortage.

Read moreThe Disconnect Between Supply and Demand in Gold & Silver Markets

WaMu has $3.33 bln loss, may be cut to “junk”

NEW YORK (Reuters) – Washington Mutual Inc, the largest U.S. savings and loan, posted a $3.33 billion second-quarter loss on Tuesday as souring mortgages forced it to set aside more money for loan losses.

The thrift’s deteriorating health prompted Moody’s Investors Service to say it may downgrade Washington Mutual to “junk” status. Shares of Washington Mutual fell in after-hours electronic trading.

Read moreWaMu has $3.33 bln loss, may be cut to “junk”

Investors are betting more than $1 trillion on a collapse in stock prices

July 21 (Bloomberg) — Investors worldwide are betting more than $1 trillion on a collapse in stock prices.

Never Have So Many Short Sellers Made So Much Money

Read moreInvestors are betting more than $1 trillion on a collapse in stock prices

Are “Dark Pools” Destined to be the Capital Markets’ Next Black Hole?

Related article:Big Traders Dive Into Dark Pools

We can almost hear that ominous “Jaws” theme music in the background and can see that huge dorsal fin as it slices threateningly through the water – knowing full well that the real terror is hidden beneath the water’s surface.

But this time around, it’s not a “Great White” that’s sparking our fears; it’s a well-capitalized and broadly based series of secret stock exchanges known as “Dark Pools of Liquidity,” “Dark Liquidity,” or just “Dark Pools.”

Most investors have never even heard the term – and are truly shocked to discover these “off-the-books” trading networks actually exist.

But to Wall Street insiders looking to anonymously move billions of dollars in stocks, bonds, and other investment instruments, dark pools are de rigueur – especially when you’re an institutional trader who doesn’t want to reveal your intentions or your actions to the “rest” of the market, until after the fact when the orders are “printed.”

And that makes these dark pools of capital highly problematic when it comes transparency: There is literally none in most pools and only limited visibility in others.

Dark Pools: From Trading Haven to Heavyweight

Dark Pools are electronic “crossing networks” that offer institutional investors many of the same benefits associated with making trades on the stock exchanges’ public limit order books – without tipping their hands to others, meaning publicly quoted prices aren’t affected. This is the capital markets’ version of a godsend – especially for traders who desire to move large blocks of shares without the public investors ever knowing.

Some examples of so-called crossing networks include Liquidnet Inc., Pipeline, the Posit unit of Investment Technology Group (ITG), or the SIGMA X unit of Goldman Sachs Group Inc. (GS).

In an era in which “secret” transactions contributed to what’s shaping up to be the largest credit crisis in history, you’d think that any mechanism that allows insiders to trade in complete secrecy and with total anonymity would be scrutinized more closely than a Roger Clemens vitamin shot. But that’s not the case with Dark Pools.

Read moreAre “Dark Pools” Destined to be the Capital Markets’ Next Black Hole?