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    Saturday, September 20, 2008

    After $700 Billion, dandy times in Wall Street

    I might have to take my words back. With rumours of a Fed bailout, the stock markets had their biggest rally in years the last two days of the week. Merril Lynch shot up 33.73%, or +7.44 points on Friday itself.

    It looks like Bank of America and Kenneth D. Lewis were not that dumb after all. But would Merril Lynch, now with better valuations and the bailout which Fed estimates to be at $700 billion, now want to sell itself? At Antifits, we always have our noses out for more drama. What a wonderful world it would be if John Thain addressed the press somthing like this:

    "I don't know where Kenneth, or the punters get their ideas from. If we mislead someone into wrong ideas, we apologize. But Merril needs nobody."

    But the crisis now is almost over after warranting the greatest intervention of the government in years. $700 Billion is a lot of money, and more so, if it ends up doing what it intends to do. Peter S. Goodman in the New York Times explains:

    "If the plan works, it will attack the central cause of American economic distress — the continued plunge in housing prices. If banks resumed lending more liberally, mortgages would become more readily available. That would give more people the wherewithal to buy homes, lifting housing prices or at least preventing them from falling further. This would prevent more mortgage-linked investments from going bad, further easing the strain on banks. As a result, the current downward spiral would end and start heading up."


    You better brush up on the past week though. Because in 25 years, if somebody asks you what Lehman was, you better say something, give names and quote numbers. It makes you sound intelligent.

    And it has also costed you $2000. I will let that sink in.

    Diamond and Kashyap explain it all [Freakonomics]
    What happened in Lehman in 30 sconds, or less [Chris DesBarres- NYMag]
    AIG in 30, more like 45, seconds [Chris DesBarres- NYMag]
    The story of the men in the middle of it all [NYTimes]
    And the men who seem to be sorting it out [NYTimes]
    Hard Truths about the Bailout [NYTimes- Editorial]
    But will it work? [NYTimes]

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