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    DOWNLOAD PRESENTATION DOWNLOAD PRESENTATION Presentation Transcript

    • Stock Market Recap
      • The Year In Review
      • A FREE Presentation
        • Brought to you by The Net Fool dot com
        • Come by and subscribe for more!
    • Where We Are Now?
      • Major Indices:
        • Dow Jones Industrial Average: Down 33.8%
        • S&P 500: Down 38.5%
        • NASDAQ: Down 40.5%
      • Federal Funds Interest Rate Target:
        • 2007: 4.25% 2008: 0.00-0.25%
      • Crude Oil Futures (per barrel):
        • 2007: $95.98 2008: $44.60
      • Unemployment Rate:
        • 2007: 4.7% 2008: 6.7%
      • U.S. Treasury Yield (Six Month Note)
        • 2007: 3.49% 2008: 0.27%
    •  
    • What Happened!?
    • The Origin
      • Following the Dot Com bubble and the 9/11 stock market crash…
      • Alan Greenspan cuts Fed Funds rate to 1%
    • The Credit Bubble Begins
      • From 2003 to 2007:
        • Credit growth exceeded economic growth
        • So-called “sub-prime” mortgages became readily available… and encouraged!
        • Real Estate = The Ever-Appreciating Asset?
    • Borrowing in Excess
      • Poor Mortgage Practices:
        • “ Alt-A” loans available without paperwork
        • People selling mortgages got commissions from sales volume… not the actual value of the mortgage
      • “ Securitization” (Think Bundling & Selling)
        • Bad mortgages were put into basket securities such as CDOs and Mortgage Backed Securities
        • What was sold actually got a HIGH credit rating!
    •  
    • Buyers Vanish from Market
      • Eventually, people stop buying homes… and with no buyers, housing prices start to correct!
      • Once home values are collapsed, the collateral holding up loans vanishes, and people suddenly cannot afford their own homes!
      • What’s more, the value of all of the securities that were sold is gone…. So HUGE firms are forced to post losses!
    • The Mighty Have Fallen
    • Bear Stearns
      • “ Off Balance Sheet” items, like CDOs and Mortgage-Backed Securities, cause write-downs of $500+ Billion from major banks
      • Run on the Bank
        • Bear Stearns collapses as buyers vanished, leaving liquidity issues in the company
        • Capital fell from $12 billion to $2 billion in less than a day… causing a complete collapse
      • Bought out by JP Morgan for $10 a share, with a $30 billion loan from the Federal Reserve
    • Fannie Mae & Freddie Mac
      • Fannie Mae and Freddie Mac were set up in the 1930s as Government Sponsored Entities (GSEs) in order to promote home ownership
      • Liquidity was completely erased once credit dried up in the housing market
      • BAILED OUT
        • Too big to fail?
        • Responsible for nearly half of the $11 trillion dollars of mortgages on the market
    • Shorters Take Control…
      • By now, we are waking up every morning to 10%+ declines in the financial stocks
      • No Uptick Rule In Place by the SEC
      • Shorters are destroying every stock on the market, causing the rest of the market to fall alongside it
      • NO confidence in the system at all
    • Merrill Lynch
      • Agrees over the weekend to be sold to Bank of America for $50 billion
      • Bank of America went for safety in the face of investment banks that were succeeding off of extreme amounts of leverage
        • Criticized over purchase, as the market tanked Monday and BOA could have bought MER much cheaper!
    • Lehman Brothers
      • Lehman Brothers had similar liquidity problems to Bear Stearns… and the stock was being shorted to smithereens!
      • The Question was: Will The Government Bail Them Out?
      • Government DOESN’T step in, LEH declares Chapter 11 Bankruptcy on September 15 th
    • AIG Bailout
      • AIG received $85 billion from the government back in September… effectively letting the government seize control of the company
      • The problem? Credit Default Swaps
        • CDSs are insurance against defaults on assets tied to corporate debt and mortgage securities
        • Weakness in AIG would have a MAJOR impact on financial institutions that bought swaps to protect themselves against loss and take writedowns
    • Enough is Enough
      • Morgan Stanley and Goldman Sachs step in to put an end to the constant shorting
      • The SEC agrees, and bans shorting on a select list of stocks for a while to ease the market pain
        • This also happened in the U.K., Australia, the Netherlands and Taiwan
      • MS and GS are converted from investment banks to “bank-holding companies.”
    • Main Street Jumps In
    • Capital Injections!
      • Warren Buffet invests $5 billion in Goldman Sachs, and $3 billion in General Electric
      • The Netherlands buys Fortis for $23 billion
      • Citigroup agrees to acquire Wachovia for $2 billion, but Wells Fargo outbids with an $11.8 billion offer that doesn’t need federal support!
    • Bailout Madness
      • President Bush signs on a $700 billion bailout plan to rescue the U.S. financial system
        • One of the largest government interventions in history
      • The world’s Central Bank’s launch a coordinated effort by lowering short-term borrowing rates in unison by a half-percentage point
    • Barack Obama Wins
      • Senator Barack Obama wins election into the U.S. Presidency over John McCain
      • Stocks endure worst post-election sell-off in history, and the market tumbles 5.1%
    • AIG Bailout Revisited
      • Government scraps the existing bailout package… and increases the giveaway to $150 billion!!!
    • China Announces Stimulus Plan
      • China announces that they are progressing with a bailout of their own, a sizable $586 billion to restore domestic demand and maintain double-digit GDP growth
    • Who’s To Blame!?
    •  
    • … Just Kidding
    • Detroit In Trouble
      • The CEOs of Detroit auto-makers fly into Washington to appeal for taxpayer money
      • First obvious sign of trouble outside of the financial sector
    • More Bailouts!
      • The government agrees to step in to stabilize conditions at Citigroup
        • Guarantee more than $300 billion in troubled assets, and injecting $20 billion of additional capital
      • The central U.S. bank plans to buy up to $600 billion of debt issued or backed by mortgage-finance firms
    • Recession
      • The National Bureau of Economic Research stated on December 2 nd that the recession officially began in December of 2007
      • Bernard Madoff is arrested from multibillion-dollar fraud… the effects of which we still cannot fully know for sure
    • The End of 2008
      • The Federal Reserve cuts its target on the Federal Funds Rate to 0%-0.25%
      • Goldman Sachs posts its first quarterly loss since going public
      • The White House agrees to lend GM and Chrysler $17.4 billion to avoid bankruptcy
      • The government commits $6 billion to stabilize GMAC… a financing company vital to the future of GM
      • … and we rally into 2009!
    • Stock Market Recap
      • The Year In Review
      • A FREE Presentation
        • Brought to you by The Net Fool dot com
        • Come by and subscribe for more!