Wednesday, October 15, 2008

Ebay & No More Rabbits are in Don Corleone's Hat

In case we needed further confirmation of a serious slowdown under way, EBAY reported tonight and warned for the Christmas Quarter. For the fourth quarter, EBAY says it now expects revenue of 2.17 billion compared to the average estimate of 2.44 billion, with earnings 6 to 8 cents below analysts' estimates. For the  quarter ending in September, the company posted its first decline ever in gross merchandise volume.

We all know that the world is just about out of bullets to slay the demons  hatched on Wall Street.  And there is no doubt as to the name of the country whose companies are almost entirely responsible for this mess.  Look no further than  AIG, Lehman, Bear Stearns, Fannie & Freddie, Merrill Lynch, Wachovia, Washington Mutual and assorted other investment banks.  Morgan Stanley took another big hit today.   No more rabbits are going to be pulled out of Don Corleone's hat, no more offers that the banks can not refuse with a sheet of paper placed in front of them with the Don saying sign here.   

We have seen just about everything imaginable and then some thrown at the devil's children-the CDOs, 40 to 1 leverage, and credit default swaps and insurance on those swaps and so many derivatives and derivatives of derivatives that no one knows what is what anymore or who owns what or how many time the same collateral has been pledged over and over again BusinessWeek -created by all of the really smart people on Wall Street pursuing their own personal financial interests at everyone else's expense. 

Bernanke may have another rate cut up his sleeve but that will take a long time to have an impact and the market will just yawn at it. So, put on a grin and happy face, for there is nothing more that can be done to avert what is already well underway. And who has been charged? A few names have been uttered such as the guy who ran AIG's credit insurance unit out of London, taking a huge VIG on the premiums written for the toxic crap insured by that unit.  Other than the heads of the five families that have been removed, with sweeteners for them to depart measured in the tens of millions, hardly a punishment I think, who has been named? They do have names. The United States is already well over borrowing a trillion dollars to make a good first stab at cleaning this mess up so maybe the citizens can at least have a few names of the responsible parties, and please do not give me the names of poor people who were given inappropriate mortgages by unscrupulous people that they could not pay, which is where Rush, Ann Coulter, my congressman Marsha Blackburn and others want to lay the blame so they can rid the country of the Community Reinvestment Act of 1977 that was passed to prevent red-lining.

Some of the losses today were just staggering. Exxon fell almost 14% or over 10 bucks a share to 62.35.  I think that Exxon has 5.2 billion shares outstanding, so the decline on just that one stock today amounted to over 50 billion. No sector escaped the carnage.  Dupont was down 11%; General Electric fell almost 8%; IBM down 6%; Citigroup down 13%; Eli Lilly down 7%, Qualcomm down 10%; MMM down 8%; Intel down 6%, and so on.  Some mutual funds lost more than 10%. Three large Fidelity funds were down more than 10% including Magellan, Fifty and Independence.

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