Archive for September, 2011
A Tough Week for Stocks
Posted by Jody Eisenman | Filed under Uncategorized
What a difference a week makes! This past week, the DJIA dropped 6.4% in the worst week for stocks in almost three years. A lethal combination of plunging commodity prices, Eurozone issues, bank credit downgrades and disappointment in the Fed’s Operation Twist sent equities plunging. Although I have written about this before, I just want to touch upon the issue of the seemingly inevitable Greek default. The prevailing wisdom is that the question of Greek default is not whether it will happen but when. However, the real issues underlying this are whom is most affected (probably the French banks) and whether this will spread to other European nations like Italy, Portugal or Spain. Meanwhile, the US seems mired in a little to no growth environment, as treasury yields continue to plunge. Ten year yields closed Thursday at 1.72; the thirty year was at 2.78%. I don’t know about you, but the prospect of lending my money to the US government for 30 years to earn 2.78% does not make me jump for joy.
The pattern of the market has been extreme swings. The VIX closed Friday at 41.25. This marks the 36th consecutive day the volatility index has closed above 30, which might very well be an all-time record. Part of the reason for this volatility is the growth of HFTs (High Frequency Traders), but it certainly doesn’t explain all of it. As I have stated repeatedly recently, I believe the market is now extremely skittish, and is probably over reacting to any sort of news, but especially bad news. As such, most traders tend to keep their positions small with relatively tight stops. Unless something dramatic happens, I continue to expect volatility to remain well above average levels.
Operation Twist
Posted by Jody Eisenman | Filed under Uncategorized
After weeks on speculation, the Fed announced the so called “Operation Twist”, which entails the purchase of longer term bonds. Here is a direct quote “The committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of six years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of three years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.”
The markets did not react well to this. Perhaps it was too little too late, but the DJIA fell over 280 points, and the futures show a further decline of over 200 points pre-opening this morning. Moody’s downgrade of three major US banks did not help. However, the real shocker to some was the unusual language that the Fed used. The Fed statement stated “Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets”. This is a very strong statement which indicates that the Fed is extremely concerned over our economic situation. Meanwhile, European shares are trading at a 26 month low this morning. As I have stated previously, I do believe that the Fed is at the point where they are almost throwing up their hands in frustration. Interest rates across the board are at levels the vast majority of us have never seen in our lifetime. Still, hiring is not picking up, and the real estate market shows very few signs of having bottomed. Meanwhile, the Eurozone crisis continues.
My Personal 9/11 Story
Posted by Jody Eisenman | Filed under Uncategorized
As we remember the tenth anniversary of the 9/11 disaster perpetrated by Islamic terrorists, I thought I would share my personal experiences on that day. It seemed like another ordinary Monday morning. I still remember that it looked like a beautiful day. I was at my desk in the financial district by about 8 am. I had several interviews scheduled in order to fill a position at our firm. My first appointment was scheduled for 9 am. The candidate called me and asked if he could come in early, as he had another interview at the World Trade Center at 930. I told him to come on over. During the interview, one of my brokers came in to my office and told me that the World Trade Center was on fire. I turned on the TV in my office and watched the incredible events unfold. Needless to say, my interviewee never made it to the WTC. He later thanked me for saving his life by moving up the appointment.
When the first plane hit, the prevailing rumor running around was that the plane crash was an accident. I still remember that before the second plane hit, a friend of mine from Arizona called me and told me he was sure it was terrorism. He used to fly planes, and he told me that it was virtually impossible for a plane to hit a tower in perfectly clear weather. Needless to say, when the second plane hit, everyone knew this was no accident. I did not hear the first tower fall. At that point, I got a phone call by a friend of mine who worked a few blocks away. He screamed into the phone, “Thank God I’m alive!” It turned out that he had walked over to the site and actually saw the first tower collapse. He told me that everyone in the street started running as fast as they could, trying to seek shelter. He dove under a car, lost his shoes, and saw the world turn black. Somehow, he made his way out of there.
At this point, my office was in chaos. I quickly met with one of my managers, and we agreed to tell everyone to leave. I work right off Wall Street, which is close to the east side of Manhattan. My employees walked east toward the FDR drive. When they got there, they saw the second tower collapse. I heard the boom from my office. At some point another plane hit the pentagon, and all hell broke loose. The feeling was at the entire United States was under attack by terrorists. There were all sorts of rumors flying around. Some people said there were car bombs at the State Department; there were other rumors of bombs planted in the NYC subway system. It was hard to know where it was really safe. At around 1030, the dark cloud spread over our area. If you looked outside, it looked pitch black. Terrifying. We lost all land line and cell phone communication. Curiously, I could still go online, and I was in a stock chat room. While everyone was talking about what happened, I told these people where I was. Someone offered to call my wife. Before we lost power, a friend of mine who worked at Goldman Sachs who lived in my town asked if he and his co-worker could come over, as they had no TV in their office. They did. When the black cloud disapated, I decided to check out what was going on outside. The street was surreal. Everything was covered with a white dust. It looked like I imagined nuclear fallout would look like. Curiously, there was no panic in the street. I was about half a mile from the WTC, and people in my area were still pretty calm. However, you need it to cover your mouth with a wet paper cloth, as breathing was difficult. We were all hungry, so I decided to head to a fruit stand across the street from my office. I used to go there almost every day and became friendly with the fruit guy. He had told me that he was from Afghanistan. The cart was still there, but he had disappeared. As everything was covered in white dust, the only things I felt safe eating were the peanuts that were in an enclosed bag. I grabbed one, figuring I would pay the guy when we showed up. I never saw him again. Whether he was part of this plot or not, I will never know.
Meanwhile, back at the office, we watched the events unfold with total horror. Both towers were gone and several other buildings were on the verge of collapse. There were still about half a dozen people left in my office, all watching the events unfold. Many have asked me why I didn’t leave. The truth was, NYC became locked down. There weren’t many options to leave, except to walk across the bridge to Brooklyn. There were two problems with this. First of all, I had my car there, and I knew NYC was going to be locked down for some time. It turned out to be a week, but it could have been months for all we knew at that point. Second of all, I live in New Jersey, which was the opposite direction. I decided to stay put until Mayor Giuliani got on TV and announced that the city was being evacuated. At that point, we decided to leave. The question was, how? I took 2 other people with me, and we walked to the parking lot. Unfortunately, it was abandoned. Fortunately, the huge gate in front was left unlocked. We found my car covered in white dust on the second floor, and decided to head toward the George Washington Bridge. I managed to get on the FDR drive at some point (the entrances downtown were all blocked off), and drove north. I have been on that highway at all hours of the day and night, and I have never seen it that empty. I think I passed exactly 2 cars heading in the opposite direction the whole way. The bridge, however, was closed. Every five minutes, my friend turned to me and kept mumbling, “I can’t believe the World Trade Center isn’t there anymore”. After some confusion, they opened it at some point, and we managed to get across the river. For the rest of the week, I was just shell shocked. I remember watching TV all week, answering emails. I couldn’t eat and couldn’t sleep. I’m usually a big sports fan, but there were obviously no sporting events that week. The funny thing was I didn’t miss it at all. The events of 9/11 showed how meaningless sports were in the context of what had happened. I still vividly remember seeing the posters for missing loved ones everywhere, knowing that with each passing day, the chance of them surviving drifting away.
We must all remember to embrace what is precious to us. There is a famous fable about how the devil comes to Earth and watches a man go to a shoemaker. In those days, shoes were made from scratch. The man demanded very sturdy shoes, ones that would last at least seven years. Upon hearing this, the devil starts laughing hysterically. Someone asks him “What’s so funny”? The devil replies, “Here you have a man that doesn’t know if he is going to live for another seven days, and he is ordering shoes to last seven years”! Unfortunately, we must all now be on guard against terrorists, who have shown zero regard for human life. I am confident we will overcome these challenges. I think it is also telling and a great credit to our security services that has not been another attack in ten years. However, we must always be vigilant. God bless America.
