Ctrl BG: A Shortcut to Financial News 10/3

I've decided to do my write up early this week- just in case something else happens right after I hit "publish."

After European banks started falling last weekend, everything else started falling apart when everyone realized that this credit crisis was not limited to the US. On Monday, Wachovia made a deal with Citigroup with the help of the FDIC to buy their bank deposit arm for $2.16 billion.

On Tuesday, Bailout plan #1 was rejected by Congress, and the Dow Jones fell over 700 points, hitting a record low since the October Market Crash in 1987. It was actually quite exciting- it is definitely not everyday that we see history in the making! This also served as a good shocker for congress members who voted against the plan. Many of them were worried about the "unpopularity" of Bailout plan #1 with their voters, since many people viewed this plan as a bailout plan for Wall Street (many nay-saying congress members are facing re-election this November). What did they think was going to happen if the bailout plan doesn't go through?

With this record crash in the market, people finally realized that this was a bailout plan for the people. This is not a time to place blame and punish those who did wrong (I mean, if we're really going to place blame, I think the people who borrowed the loans knowing they cannot repay them is equally to blame as the banks who made the loans to begin with). This is a time to take action before the effects of the credit crunch affects the rest of the economy. It would be irresponsible for the government to do nothing. Call me selfish, but right now, as a worker and member of the society, I'm more worried about the adverse effects this will have on my job (the just reported the biggest job lose in 5.5 years!), my 401K, my ability to get a loan (not that I'm planning to buy a car/house any time soon, but IF), and just my way of life in general. Even if you don't invest, have a 401K or have/need a loan right now, businesses you're linked to may close down because they are unable to get a short term loan to fund their business operations or their prices would go up because it will be more expensive for these businesses to get a loan and operate.

Good thing voters and congress members finally realized this on Friday, and voted 263 vs 171 for Bailout plan #2, which was created in record time. It is basically the same as Bailout plan #1, except with an extra $150 billion put aside for random tax packages (way to take the "load" off our future generations). They ramped up the FDIC insurance limit to $250,000, put more oversight on the execution of the $700 billion, gave the SEC authority to suspend the "mark to market" accounting standard (so firms don't have to mark down their assets just because the market is crazy these days) and a gazillion little tax breaks benefiting the environmental friendly, middle class, natural disaster hit states, homeowners,educators and businesses. Basically something for everyone- even people with mental health needs and the makers of "certain wooden arrows designed for use by children" (I don't even know what that is). It sounds like basically the same plan to me, except policy makers decided to take this opportunity for "quick action" to randomly put in policies they've been meaning and wanting to pass, to make it sound like a better plan. Oh well, I guess it works out for everyone in the end.

Unfortunately, now even the bailout plan isn't good enough to restore confidence and the market continued to fall after Bailout plan #2 passed on Friday. It's going to take a while for the bailout to take effect. At least there's hope. I'm thinking it is not a good time for Mr. Schwarzenegger to be asking for a $7 billion short term loan to weather CA out until tax comes in, in spring.

On the other hand, while the current economical situation is being compared to scary sounding things like the economic Pearl Harbor, the Great Depression and at the edge of the abyss, Mr. Buffet went on a shopping spree. After buying some of Constellation Energy for $4.75 billion and Goldman Sachs for $5 billion in September, this week, he also bought 10% in Chinese battery and automotive maker, BYD, for $230 million and more of GE for $3 billion. Even though this may sound shocking in this market, Buffet is actually a very sensible shopper. While fashion trends go in and out, the classics will never go out of style. Goldman Sachs and GE definitely qualify as classics, one being THE top bank on the street and the other being literally the backbone of the American economy, dabbling in a bit of everything. One is Hermes and the other is Bergdorfs. And the best part is that he's buying all these quality investments at a BARGAIN price. Another good shopping philosophy is to invest in emerging talents before they're famous and mainstream. BYD with its rechargeable green batteries and electric cars is definitely part of an emerging market. I'm not sure in which category Constellation Energy fits in, perhaps a bit of both? Either way, Buffet is a very sensible fellow shopper. As he said, "I like spending...The cheaper things get, the better I like it. This is a good period for us..go ahead." I can definitely relate to that. If only I knew the market classics as well as I know the fashion classics and had the capital to act on it. Another Buffet philosophy that I agree with, "there's no way a smart person can go broke except through borrowed money. All borrowed money does is help you get it a little faster, but (it also will) help you get poorer a whole lot faster." Credit card debts are definitely not pretty.

Buffet also made a deal with Wachovia this week, through Wells Fargo (which he owns a lot of). Yes, the same Wachovia that I said earlier in this post, that had just made a deal with Citi on Monday. Wells Fargo upended Citi's offer and offered to buy (the whole of) Wachovia for $15.1 billion without government help. Previous agreements and honor of word aside, this is definitely a better deal for Wachovia and the government since they don't need to help anymore. Wells Fargo is actually one of the few banks that is weathering this market out quite well, having had less exposure to bad debt (they have a much stricter credit requirement- as they should!). Citi, of course, is miffed that their government sponsored bargain deal has been thwarted and are thinking of suing them. Do I see a banking bitch fight coming? Probably not, the government would probably do something. This market doesn't need anymore drama... but it would've been fun to watch :P. It's no wonder that CNBC reputedly has had the best ratings these last two weeks since earlier this decade!

The Puffer Trench

Every year when fall comes around, I am shocked by how cold it is. Summer and time does a good job of fading away memories of the bitter cold and biting wind. Walking around, people are pulling out their trench coats against the cold. But is that enough to keep us warm? It IS only made out of a layer of cloth (or two, counting layers) after all. I own one and I don't find it very warm at all. Maybe I'm just more easily chilled than others, but I'm thinking that something a bit more substantial is called for. Luckily for me, Burberry knew just what I was thinking.
I am loving Burberry's latest puffer trench coat. Lined lightly with down, it is most definitely warm enough for fall. Unlike other puff jackets however, it still has SHAPE. A very slimming and flattering trench coat shape at that. What more can you want? It will totally last you all the way through fall (plus or minus some layers) and maybe even winter (probably not for snow though, for snow you need the heavy duty stuff)!

Image Source: Burberry

Paris S/S 09: Nina Ricci

When I was a kid, I'd somehow got the impression that Nina Ricci was for old people (yes, I got started into fashion very early). I am definitely much wiser now (either that or Olivier Theysken performed a miracle), because the Nina Ricci collection this season was anything but old.
There were lots of tulles and leggings. The color palette was a nuetral cream, pale and nude. The shape of the skirts, short and modern in the front, but soft and overflowing behind them, were beautiful. There was also a big shoulder silohoeutte thing going on that contrasted well with the soft flows of the dresses. I especially loved the white big shoulder leather jacket (left) over the super feminine dress.
The rest of the runway was interesting. There were lots of shorts and t-shirts, and leotard looking outfits (left), that looked more like day to day home wear (or ballet costumes) than ready-to-wear. Then there were super heroe inspired ball gowns. Perhaps this is an extension of Christina Ricci's gorgeous red super heroe dress for the Met Costume Institute Gala this year?

Image Source: Style.com

Ctrl BG: A Shortcut to Financial News 9/28

Since I enjoyed writing the last post so much, I've decided to continue to do so. It has proven to be a great way to help me put everything into perspective and it's been fascinating reading what everyone else thinks as well. Again, feel free to correct me and put in your two cents, as obviously, I am no expert. I'm just a girl who happens to be interested in the current state of the economy.

Last Sunday night, Goldman Sachs (GS) and Morgan Stanley (MS) were approved by the Fed to become bank holding firms, officially ending the era of the independent investment banking model on Wall Street. They will now be able to open their own commercial banking arms and take in deposits, which they can then use to back up their investment banking operations- as JP Morgan, Bank of America (BofA) etc already does- thus ending investor concerns about the sustainability of their business model model. They now also have permanent access to borrow federal money (instead of within the window temporarily opened for them) and can become a FDIC insured bank, which insures indivisuals up to $100,000 of bank deposits. The following day, MS announced that they were getting as much as $8.5 billion of cash injection from Japan's Mitsubishi UFJ Financial Group (MUFG) in exchange for up to 20% equity stake in MS, further fortifying their position. I guess the deal with China fell through (or were the Chinese getting too greedy and the US govt didn't like that?). This is probably a better move anyway, since MUFG is the world's No. 2 bank by deposits, so surely it will help MS's transition into commercial banking go more smoothly. MS apparently already has about $36 billion in bank deposits from their private wealth management (PWM) business and are looking to expand into Asia. Or so, that's what CNBC said, but I didn't know PWM deposits count as bank deposits, but if they do, I guess this means that MS are looking to expand their PWM business in Asia. Or perhaps this $36 billion comes from their Utah-base industrial bank, which will be converting into a national banking association, names the Morgan Stanley Bank, National Association? Goldman Sachs' approach is must easier to understand (or so I think). They currently already have two deposit taking subsidiaries, with about $20 billion in deposits, and plan to create a new one called GS Bank USA, that will have more than $150 billion of assets.

This conversion is not all good and dandy though. Becoming a bank holding also puts both banks under more intense scrutiny and regulations from the Fed, which will probably limit their proprietary trading capacities (the division where they trade company assets like a hedge fund, taking on great risks), which happens to be one of their most lucrative divisions. I don't know about MS but personally I'm feeling quite optimistic about GS. On Tuesday, Warren Buffet invested $5 billion in GS preferred stocks and will also recieved warrants to purchase another $5 billion in common stock within the next 5 years- effectively give him about a 10% stake in GS. They also raised another $5 billion from a public stock offering, all within a few days. This and Buffet's approval, which in the investment world is the equivalent of getting Anna Wintour's approval in the fashion world, make me quite optimistic. Besides, I have always had great confidence in the power of brand image, Buffet just likes to call it "franchise."

On Thursday, Washington Mutual (WaMu), was seized by the FDIC, making it the biggest banking failure ever. Within 9 days, customers withdrew about $16.7 million in deposits from WaMu, literally breaking the bank. JP Morgan picked up WaMu's banking assets for only $1.9 billion. JP has had its eye on WaMu's operations in CA and FL for a while, and had offered for them in March, but was rejected in favor of a capital injection from TPG private equity (whoops!). It seems like JP got yet another bargain. JP is not the only one who got a sweet deal in all this however. It appears that Mr. Alan Fishman, WaMu's CEO for only 2 weeks, is eligible for $11.6 million in cash severance AND get's to keep his $7.5 million signing bonus. Not bad for two weeks worth of work.

It seems that the financial tsunami is expanding abroad too. Fortis, the largest Belgian financial-services firm, just received an $11.2 billion euro bailout from Belgium, the Netherlands and Luxembourg in exchange for 49% stakes in the Fortis in their respective countries. It's almost like the European version of AIG.

The next bank on the chopping block is Wachovia- funny since a week ago they were in talks to merge with MS. Citigroup and Wells Fargo are currently in a bidding war over a possible emergency takeover of Wachovia, since it's stocks dropped dramatically on Friday.

While all this was going on, politicians were hard at "work" trying to get the $700 billion bailout bill to pass Congress. I'm not that into politics, but even I tuned in Wednesday morning to hear Paulson and Bernanke defend their case to the people at Congress. I'm not sure how politics usually go, but to my untrained ears, it sounded like a verbal merry-go-around, placing blames and trying to trick each other into saying something wrong. A members ask a simple yes/no question, Paulson/Bernanke would answer in a very roundabout way which prompts the member to ask, "so was that a yes or a no?" to which they'd repeat what they'd just said again. This would go on until the time is up or someone finally gives up from the frustration of it all. No wonder it takes them months to get a bill to past. I'd imagined it to be more diplomatic and sophisticated. Anyway, I think the gist was that people didn't think taxpayers should have to bailout Wall Street (and individual homeowners) for taking too on stupid risks. But they had to do something. So they moved onto putting clauses on the plan, for oversight to monitor the use of the money, a cap on CEO pays and for warrants in companies who will be using this plan, so taxpayers would at least get something back for the $700 billion they spent. There was a gliche, when a bunch of Republicans rejected the plan and proposed some other plan to privately insure mortgage backed securities (there was shouting involved!), but it sounds like they're back on track now and a bill will be voted on Monday.

Personally I don't know what to think about this bill. On one hand, I don't think tax payers should have to bail out people who took on unnecessary stupid risks and expect everyone else to wipe up their mess when things go down just because the mess is big enough. As if our future generations didn't already have a big enough debt to clear up already, with the war and the social security problem etc. but now we have this. On the other hand, just like a bad trend, someone has to step in and put a stop to it before it spreads through the population. With the newly added clauses, it's the next best step there is. By taking the distressed debts out of "weak" hands and into "strong" hands, they might even make money in the future when the housing prices go back up! Besides, if the likes of Paulson, Bernanke and Buffet, says this is a sound plan, who am I to gainsay the experts?

Claudine Pumps by Coach

My first reaction upon seeing this season's peep-toe winter booties was EW. That is just unnatural, completely against the laws and purpose of boots! Your toes will definitely freeze off if you wear this in winter! And so when I first saw these Coach Claudine pumps, I immediately put a no to it. Why would they ruin a perfectly nice pair of pumps and put a random peep-toe on it? I wasn't even swayed when I saw my favourite Gossip Girl, B, wearing them on the set. To be honest, this is not one of her best outfits. To begin with it doesn't look very flattering on her. Her waist looks big (even though it's belted) and the length of her skirt makes her look short (or is it this picture?). Her top looks summery while her scarf and skirt looks wintery. The shoes is just the child of both these looks.

But then I stared at the picture of these pumps some more and it really started to grow on me. The masculine Oxford style is made softened by the satin bow and the slim and elegant shape of the heel. The mini platform in the front makes these four inch pumps more comfortable and wearable (or so I hope!). The combination of suede, satin and patent leather is very clever. The patent is even neatly placed to wrap around the suede parts to protect it from dirt! The whole package is just very nice!

As for the peep toe, I guess in the world of fashion, there is no such thing as being weather appropriate. I can always wear colored stockings inside for warmth and some interesting color. And if you try to imagine these pumps without the peep toes, you must admit, it IS missing out something. Besides, it looks like peep-toe oxford booties are here to stay, judging from the S/S 09 Burberry Prorsum runway.

When it comes down to it, these are definitely trend shoes and not "investment" shoes. Personally, even though I'm coming around to it, I'm still not sure if they're not too weird for wear. What do you think? Is this an embraceable trend or should we shun it aside and hope it goes away?

Image Source: Coach.com

Milan S/S 09: Burberry Prorsum

I love Christopher Bailey. He revamped the Burberry checks and made them cool again and he's just looks like such a cutie! But even that didn't stop me from being disappointed in his latest collection. It was a depressing show.
The models with their long trench coats and floppy hats almost look like those creepy nudists on the streets. The dreary colors didn't help (I thought it was supposed to be a spring/summer collection?). I could see some bits and pieces of the effortlessly chic look here and there, with the long cardigans and skinny pants (left), but the rest kind of just blended together into a muddy haze. The designs were not bad, but it was just not very interesting or inspiring. It was like there were 52 versions of the same look. Oh wait, that's not quite true. One model stuck out in particular- in addition to being drenched upon, she looked like she took an extra role in the mud.... and accidentally got dead leaves and branches stuck on her coat (right).
Oh and check out the shoes. It appears that not only do we now have peep-toe oxford shoes, but we will have peep-toe-sling-back oxford shoes very soon too! More on how I feel about these later.......As for the color of these shoes, it is absolutely ugh, but I suppose then you wouldn't have to worry about getting it dirty from rolling in the mud!

Image Source: Style.com

Emmy Awards 2008

OK, honestly I wasn't interested in the Emmy's this year (because there is simply so many more interesting news right now, like the financial news and the China milk scandal.) But the one thing that I did want to know about the Emmy's was that Tina Fey, Alec Baldman and 30 Rock won four 'big' awards -so yay for them!

Image Credit: http://www.style.com/