News
Opinion
Television news reports Monday night were full of talking heads opining about the sorry state of the stock market after the Dow Jones Industrial index dropped 500 points.
Video clips of stressed-out looking traders on the floor of the New York Stock Exchange dominated segments about the sale of investment banker Merrill Lynch to the Bank of America, the bankruptcy of investment bank Lehman Brothers and a cash shortage at insurance giant AIG.
That stress level, however, wasn’t apparent at Wachovia Securities in Incline Village Tuesday.
Branch President Frederick Findeisen said Wachovia’s Incline location had not been inundated with phone calls from worried investors.
“Usually with big market days my phones are quiet,” Findeisen said. “Right now, I’ve got 10 brokers here and only one line is lit up. People aren’t panicking, and we’re telling them to stay the course and not panic if they do call.”
Findeisen said investors are still safe in the money markets and said he expects a market turnaround sometime before the end of the year.
David Vomund, who owns Incline-based Vomund Investment Management, also cautioned investors to stay pat.
“For the most part people should sit tight, when the market has a big drop it’s the worst time for people with long term investments to look at getting out,” Vomund said. “The time to evaluate your investments is when the market is in more of a regular cycle.”
He urged investors to look at treasury bills if they reached their tolerance for a drop in the market, adding that t-bills are a solid, safe, long-term investment.
Vomund said Monday’s 500-point drop garnered headlines because of the big names attached to it — Lehman and AIG — but said it’s only a slightly worse drop than what has been seen recently.
“There have been plenty of drops in the 300-point range recently that haven’t caught a lot of headlines,” Vomund said.
He also said this drop doesn’t compare to “Black Monday,” on Oct. 28,1987, which was a 508-point drop that affected markets worldwide.
“1987 was far, far worse in terms of scope,” Vomund said.
Bill Ferrall, director of business relations for the Tahoe Lending Group, said the bankruptcy filing by Lehman Brothers is actually a positive step because the market is nearing its low point.
“What we’re seeing now is that some of the events that need to occur before a bottom of the market can happen,” Ferrall said. “We’re seeing the unwinding of over-leveraged markets now.”
This means that the average customer walking into the Tahoe Lending Group in search of a loan will need to be able to pay at least a 25 percent down payment in order to receive a loan, Ferrall said.
“The jumbo markets still aren’t sure how to lend,” Ferrall said. “Until there is some significant re-organization, you won’t see easy jumbo loans.”
Ferrall said that lending houses like Lehman Brothers overstocked their mortgage portfolios with bad, devaluing mortgages. Once those mortgages devalued, the lending houses ran into the problem of not having enough cash to back their mortgages, leaving them bankrupt even though the companies were still technically solvent.
“There are still assets at Lehman, they didn’t vaporize,” Ferrall said. “But, they (Lehman) didn’t have enough in liquid (cash) to back those assets any longer.”
Insurance company AIG found itself in a similar situation Tuesday after a devaluation of its assets left it almost $75 billion short in cash. According to published reports, the Federal Reserve Bank was pondering a bailout of the company, which insures a number of mortgage-backed securities. Without a loan from the Fed, sources told the New York Times that the agency may go bankrupt as soon as today.
Paul Groman, an agent with the Mike Menath Insurance agency in Incline Village, which sells AIG insurance policies, said local residents with AIG policies need not worry about their coverage.
“The essence of the turmoil is not within AIG’s insurance segment but within their banking end of operations,” Groman said.
He said the company’s insurance operations are solvent and have billions in assets to back them up.
Video clips of stressed-out looking traders on the floor of the New York Stock Exchange dominated segments about the sale of investment banker Merrill Lynch to the Bank of America, the bankruptcy of investment bank Lehman Brothers and a cash shortage at insurance giant AIG.
That stress level, however, wasn’t apparent at Wachovia Securities in Incline Village Tuesday.
Branch President Frederick Findeisen said Wachovia’s Incline location had not been inundated with phone calls from worried investors.
“Usually with big market days my phones are quiet,” Findeisen said. “Right now, I’ve got 10 brokers here and only one line is lit up. People aren’t panicking, and we’re telling them to stay the course and not panic if they do call.”
Findeisen said investors are still safe in the money markets and said he expects a market turnaround sometime before the end of the year.
David Vomund, who owns Incline-based Vomund Investment Management, also cautioned investors to stay pat.
“For the most part people should sit tight, when the market has a big drop it’s the worst time for people with long term investments to look at getting out,” Vomund said. “The time to evaluate your investments is when the market is in more of a regular cycle.”
He urged investors to look at treasury bills if they reached their tolerance for a drop in the market, adding that t-bills are a solid, safe, long-term investment.
Vomund said Monday’s 500-point drop garnered headlines because of the big names attached to it — Lehman and AIG — but said it’s only a slightly worse drop than what has been seen recently.
“There have been plenty of drops in the 300-point range recently that haven’t caught a lot of headlines,” Vomund said.
He also said this drop doesn’t compare to “Black Monday,” on Oct. 28,1987, which was a 508-point drop that affected markets worldwide.
“1987 was far, far worse in terms of scope,” Vomund said.
Bill Ferrall, director of business relations for the Tahoe Lending Group, said the bankruptcy filing by Lehman Brothers is actually a positive step because the market is nearing its low point.
“What we’re seeing now is that some of the events that need to occur before a bottom of the market can happen,” Ferrall said. “We’re seeing the unwinding of over-leveraged markets now.”
This means that the average customer walking into the Tahoe Lending Group in search of a loan will need to be able to pay at least a 25 percent down payment in order to receive a loan, Ferrall said.
“The jumbo markets still aren’t sure how to lend,” Ferrall said. “Until there is some significant re-organization, you won’t see easy jumbo loans.”
Ferrall said that lending houses like Lehman Brothers overstocked their mortgage portfolios with bad, devaluing mortgages. Once those mortgages devalued, the lending houses ran into the problem of not having enough cash to back their mortgages, leaving them bankrupt even though the companies were still technically solvent.
“There are still assets at Lehman, they didn’t vaporize,” Ferrall said. “But, they (Lehman) didn’t have enough in liquid (cash) to back those assets any longer.”
Insurance company AIG found itself in a similar situation Tuesday after a devaluation of its assets left it almost $75 billion short in cash. According to published reports, the Federal Reserve Bank was pondering a bailout of the company, which insures a number of mortgage-backed securities. Without a loan from the Fed, sources told the New York Times that the agency may go bankrupt as soon as today.
Paul Groman, an agent with the Mike Menath Insurance agency in Incline Village, which sells AIG insurance policies, said local residents with AIG policies need not worry about their coverage.
“The essence of the turmoil is not within AIG’s insurance segment but within their banking end of operations,” Groman said.
He said the company’s insurance operations are solvent and have billions in assets to back them up.
