What I Learned Today

Received this email on Friday:

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Fulltime Associate Recruiting Presentation and Reception
When: Thursday, October 9, 2008
Where: Lehman Brothers World Headquarters, New York
Attire: Business Formal
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but the RSVP link seems to be broken..

Military Costs of Major U.S. Wars in “constant dollars” (that is, adjusted in terms of 2008 U.S. dollars) from the American Revolution to our current conflicts. All figures represent estimated military costs only, and do not include assistance to allies, veterans benefits, interest on borrowed money, etc. The map also reports the cost of war as a % of GDP during the peak year of each conflict.

View the interactive map. Also, here’s the original data report just in case you wanted to dig deeper.

Uhoh, the GSEs just became TSEs

Big News of a bailout for Fannie and Freddie – investors cheer, the markets rally, but what does it mean to you?

GSEs —> TSEs?
Well, the Government Sponsored Enterprises just became Taxpayer Sponsored Enterprises. The Treasury “bailed” them out, changed their leadership, and is putting Fan & Fred under the management of the Federal Housing Finance Agency. It’s the most radical regime change in global economic and financial affairs in decades, and as economist Nouriel Roubini states “the greatest nationalization in the history of humanity.” He now likens the USA to the USSRA, The United Socialist State Republic of America. Worth a read.

For you, the borrower:
This could mean (slightly) lower rates and greater availability of credit. F&F will now have the cash to buy mortgages from other banks and create more mortgage backed securities to sell off to investors. That means those other banks will have the money to create more mortgages - - that way there’s more money moving about the system. So that’s good for a borrower. If you’re a current mortgage holder, however, you’ll likely see little change.

For you, the homeowner:
Though home prices will continue to fall, the bailout is a potential sign for future stabilization of prices. That’s good for the 1 in 3 mortgage holders whose current mortgage is worth more than his home. Some economists project the market to bottom out as early as the first quarter of 2009; most project early-mid 2010.

For you, the F&F shareholder:
Hm, not sure yet. Though Paulson did make it clear that the TSE’s “will no longer be managed with a strategy to maximize common shareholder returns.” Sure, change the policy now that U.S. taxpayers are the real shareholders…

For you, the national Federal Debt:
The cost of government intervention has yet to be determined, but it will be huge. Upon takeover, we’ve already immediately injected F&F’s $6 trillion into the national debt. Allegedly, a memo that has been recently circulating among economists at the Federal Reserve projects that Federal debt could reach $23 trillion by mid 2010. (It’s currently $9.67 trillion)

For you, the everyday taxpayer:
This is why I say uhoh. As a taxpayer, you’ll be footing the bill. The bailout basically means Fannie and Freddie will have an unlimited taxpayer-funded credit line. This doesn’t mean our taxes will be increased to bail them out - at least not yet. But it does mean that now our government is further in debt – now indebted to hedge funds, domestic and international banks, foreign central banks, etc. The government already put in $1 billion to F&F, and may put in up to $200B more.

And what if the bailout doesn’t work?
If the bailout does not succeed - that is, it doesn’t help the housing or credit markets - well then we’re in big trouble. If the government can’t inject liquidity into the market, then who can?

United Airlines stock fell 76% today from $12.17 at open to about $3.00 mid morning. Why the collapse? Because a six-year old story about UAL’s 2002 bankrupty filing was somehow reposted online on the website of the South Florida Sun-Sentinel, a paper owned by the Chicago Tribune Co. It was quickly refuted and the share price recovered after a 90 minute trading halt. Oddly enough, the story was not dated 2002, but was dated September 8, 2008. The Sun-Sentinel editor denies that the newspaper published the article. Wow - how quickly the markets react.

Genius or just bizarre?

The ad world is all a buzz about the new Microsoft Windows commercial featuring Jerry Seinfeld and Bill Gates. It’s a bit hokey, rather long, and, well, it just doesn’t make any sense. Not that there’s anything wrong with that.

Ad Age calls it “a classic Crispin Porter oddity” - Crispin Porter is the ad agency that created the commercial, and is known for its creativity and its ability to resurrect brands with such ads as the King character for Burger King, embracing the “tiny” for Mini Cooper, the “Truth” smoking campaign.

Microsoft had to bring out the big guns, as over the past two years it has been single-handedly rebranded by Apple in their “Mac vs. PC” ads. Says Rob Enderle, an advisory analyst for tech companies, in the profile on Fast Company, “It’s the first time I’ve ever seen a major national campaign that disparages a competitor, and the competitor just sits back and takes it.”

Well Microsoft isn’t taking it any longer, and it has brought on ad icon, Alex Bogusky, the bigshot at Crispin Porter, to help fight back. But is it working? Well, you may not think so after watching the commercial. But if you didn’t understand, rest assured - nobody did. It’s a “teaser ad” - the first commercial in a larger campaign, often “designed mainly to attract attention, and [will be] followed by other ads that explain the true message of the marketing effort.”

I look forward for what’s to come. Especially if Jerry’s featured. Apparently Microsoft may reinvent cool. Says Andrew Keller, co-exec at CP, about the ads to come, “To try to be cool is to not be cool. To chase cool, you’re chasing something that already exists, which means you’re always going to be on the wrong side of it, you’ll always be following.”