The Market

Gary asked in a comment to an earlier post about any market insight I may have with what's going down on Wall Street today. Even though I work in the financial services industry, I don't have a lot of day to day dealings with the market and stock trading. But I am following the current crap that's rolling downhill right now with a lot of interest. One of the best summaries of what is happening that I have read actually comes from our company's CFO, Ted Truscott. I'm not enough of a corporate drone to have warm fuzzy feelings about all of our management and their actions, but Ted is one guy who usually can do no wrong in my eyes. I think he's a smart guy and knows the markets well. Here's a brief excerpt from his latest market update from September 23, prior to the $700b package failing to get through congress and the market going down nearly 800 points (highest single day point loss, but not even in the top 10 of highest percentage losses):

As young commercial bankers, we learned a lot of lessons about credit from demanding, and not particularly polite, bosses. It was boot camp, and I am afraid that a whole generation of today's bankers are about to go back to boot camp themselves. We learned that borrowing short and lending/investing long was an eventual recipe for disaster at any corporation, and particularly banks. We also learned the “C's” of credit, which included character, capacity and collateral.

A borrower had to be of sound character or perhaps a loan might not be repaid. The capacity to repay, including the ability of an individual to remain employed or a company to generate free cash had to be present; otherwise the loan was too risky. Finally, there was collateral. A home could secure a mortgage, a plant could secure a long-term loan and receivables could secure a short-term loan. The collateral had to be substantive because falling prices could render the collateral worth less than its stated value.

The last 25 years, particularly the last five, have seen all the rules of credit cast aside. Our nation has feasted on credit in order to live beyond our means and to create higher investment returns than could be sustained. Character has mattered all too little, capacity has been imagined rather than real, and collateral (particularly homes that secure mortgages) has fallen deeply in value.

How's that for calling a spade a spade? You can read the full market update here, or if you've got the time and find this stuff to be interesting you can read all four market updates Ted has issued since June. The links are below:
June 12
July 15
September 8
September 15
September 23

The closing line of the final article is better advice than I can give:
"At the end of the day, we continue to encourage investors to stay invested, be disciplined and resist the urge to let emotions drive their decisions — even during difficult times like these."