Yesterday, AIG reported the biggest loss in America’s corporate history (just a few days after RBS similarly reported the UK’s biggest corporate history- a staggering, but nevertheless still smaller £24.1bn).  With a loss of $61bn, the insurance firm again ran to the government to seek for more aid, which they got in the amount of $30bn in exchange of majority ownership in two of their money-makers: American Insurance Association (AIA), its business in Asia and American Life Insurance Corporation (ALICO).  Remember that the firm entered this pit after they decided to issue billions of dollars worth of credit default swaps, the instrument which had it share of the spotlight after other firms, notably Lehmann Brothers, fell victim to the failure to manage risks associated with CDS. The trouble of the firm is further compounded by the news that former CEO Hank Greenberg will be filing a lawsuit against the company for allegedly being misled to buy inflated prices of the AIG stock.  As the firm’s biggest shareholder, Greenberg’s wealth is without a doubt wiped out by what has happened.

It was a rather exciting day for the markets as the Down Jones plunged under 7,000 to 6,763, its lowest level since around 2nd quarter of 1997.  More interestingly, the S&P managed to stay barely above the 700 threshold at 700.82.  With futures on the green, there is a possiblity to escape crossing that threshold… at least for a day or two.  As of 3am CT, there’s about 120-point move to the north so I am hopeful for a bounce after a long time of bloody trading; S&P has been negative in 9 out of the last 10 sessions.

Other major news revolved around other financial institutions with HSBC performing a $17.7bn issue rights as well as cutting its dividend to increase its capital level.  This caused its shares to suffer by as much as a 19% drop in NY. Moving to BofA, CEO Ken Lewis claims the $20bn aid sought for the acquisition of Merrill Lynch was a tactical mistake and it put the bank on the same level as Citi. In the commodities market, while still under 50/barrel, oil saw a 10% drop to a little over 40 a barrel today.

Some random thoughts:

• The market’s been waaay oversold that it would just be quite right (AND REFRESHING) to see a bounce. I need to find out how I can start investing and take advantage of this great opportunity that is the depressed prices.
• As much as I should be appreciating that Obama is keeping his word to bring change, I just don’t think it is viable for him to achieve all the plans  he laid out in his State of the Union Address. It’s just way. too. ambitious.

(A brief update)

Lately, I have been lurking around just two places on the web: twitter (username: blueblooded) and Paul Kedrosky’s blog (paul.kedrosky.com). Twitter has unexpectedly been… entertaining. It’s perhaps one of the easiest ways of receiving various information from various people about various subjects. Not to forget it’s the quickest way to blog.  Quite a convenience for people like me who tend to be lazy bloggers most of the time.

Paul Kedrosky is a regular on CNBC. A very smart man who enthusiastically gives me and thousands more our daily dose of interesting readings. He is a research consultant for Ten Asset Management and a senior fellow at Ewing Marion Kauffman Foundation.

I’ve also been busy reviewing for the CFA (just about to move to the 5th book, just after 2 months and 3 more left for the 2 remaining books and review), but the pace at which I’m going, fast as it may be, is enough to scare me. I may be reaching the 250-hour minimum suggested review time but it doesn’t quite bode well for me that I’m finishing a book, on average, in less than 2 weeks when each should at least take three. The current book I’m on, I began reading just exactly a week ago.  And now I’m down to reviewing the last chapter and I’m ready to move on.  It’s one thing to understand the concepts, it’s another to retain them along with the eerie collection of formulae that are slapped to everyone studying for the exam. Somehow. I take comfort knowing that I did understand pretty much everything I’ve read and I have enough time to review and master everything. I hope to be very well prepared come June. Let that be my gift to myself.

———————————

Things are not yet fixed. Far from it should I say.  Left to right, there are debates about nationalization, the role of economists, how to fix the recession, the bailing out of central and eastern Europe, just to name some.  Each of them has their own points of contention. For now, let me focus on nationalization.  I am probably oversimplifying, but I am simply not very welcoming of the idea of the government playing a role managing private institutions.  There’s definitely a reason why the markets are, until recently, best left to themselves.  Let’s go back to Reagan: government is the problem.  Even with the best intent (or not), it becomes simply a cause of inefficiency.  Taxes? Subsidies? Ceilings and floors? If you understand basic economics, then you would understand that those are the simplest illustrations of the kind of inefficiency the government creates.  (If you want more examples, read James Bovard’s Lost Rights and you’ll understand why I hold this position.)  And I’m sorry to include this, but with a Democratic administration in place for the next four years, this isn’t something you want to allow to happen so easily.  Seen how many times Pelosi hopped from her seat during Obummer’s state of the union address? That could only scare me. (It actually also annoyed me.) BTW, I’m neither a fan of Limbaugh nor Jindal.

I am not claiming that government regulation is completely unnecessary, but their involvement cannot go beyond a certain extent. There has to be limits.  I still believe in the forces of the demand and supply at work, and in survival and market failure. If strings had to be attached to the bailouts of certain institutions, then I believe there similarly has to be strings attached for the government.  So nationalization? Maybe. But if it enters the picture, it does so only to do what it has to do. And that is not to control the institutions and instruct them what to do.  Protect taxpayer money and check that it’s used appropriately? Remember the housing plan? I wonder how that protects taxpayers’ money. You’ve probably heard of Rick Santelli.

I don’t have a problem with big bonuses. Excessive as the bankers’ bonuses may be, a management that runs a rather profitable business has the right to have its share of financial reward. The way businesses run is this: labor is compensated on a generally fixed rate and any outstanding result is typically greeted by bonuses.  These bonuses are apparently contingent on how profitable the firm has been for a period.  The clamour for a cut on the compensation of bank executives who dared take excessive risk on derivatives, only for those actions to backfire and drag their firms, the global economy, and the populace down a deep abyss is completely understandable.  When they see executives spend million of dollars renovating their offices, which are probably more than conducive for work to begin with,  while they get laid off and lose their source of income just triggers an emotional outburst.  It eludes me how these people can still choose to spend for corporate jets and trips to Vegas when they very well know that they are in close public scrutiny. Many are furious because of the idea that these firms “asked” for taxpayer money, only to spend so lavishly on things that not a single bit resolve the financial problem. Whether it is taxpayer money or their own money they spend, who in their right state of mind would throw out money, huge sums of money, while the rest of the world tries to grapple with the fact that people’s money are being spent to save their bottoms as well as the unemployment figure that grows by the day? That is just shameless.

Today, Obama laid out his plan of setting a salary cap of $500,000 for the top five executives of those institutions who took taxpayer money.  I wouldn’t say that he wasn’t provoked by the circumstances.  Having said that, I believe this is simply a sideshow and if there’s anything good that would come out of this, it is that more would be able to sleep just a little more soundly, thinking the executives have been served.  Perhaps more capital saved when accumulated over the years? But, I don’t see how much of a solution this is, if not simply yet another government regulation added to more that are already on their way.  Compensation is at best a minor issue.  The salary cap may be rightly imposed at times like this – perhaps even a no-salary rule wouldn’t even be so bad. These people have taken so much in the past years that getting rid of their compensation for the duration of the recession would still allow them to live waaay comfortable lives. But a permanent compensation cap I don’t think is necessary, if at all appropriate. What needs to be fixed is the system.  One idea, which is not even new and extreme, is to base their bonuses on their firm’s performance.  For their firms to write-down huge amounts of losses and for them to still request for bonuses, until it raised the eyebrows of politicians and the citizens alike, is indeed an insane and insensitive move.  But as we saw, the effects of one’s decisions are not right away reflected on the same period the decision was made. The result of the decision to accumulate billions of dollars of credit default swaps (by Lehmann Brothers) did not come to roost until just last year. A more advanced suggestion then becomes – give out bonuses a year or two after the current year.  That way, significant decisions that have been made would be given time to take effect. Furthermore, a $500,000 salary cap may just prove to be counterproductive.

And that stimulus plan? Tax cut, government spending, and tax cut. And a modification of the mortgage rate. This is a plan to stimulate the economy, not to make transfer payments.  Where I stand on the political spectrum might have been given away by my opinion on this matter but the other party’s plan just doesn’t convince me. If implemented, they will just prove to be waste of money.

This issue with General Motors has been ongoing for weeks now and seemingly the most obvious solution is similar to what banks and non-bank financial institutions received- a bailout. Today, the US Senate agreed on a $25billion loan to GM to save the company. The loudest argument against non-bailout is the spiral effect bankruptcy/failure has not only to GM but also to thousands of its suppliers who run the risk of similarly filing for bankruptcy if GM is allowed to fail. Following the huuuge job cuts pending the failure are the big sums of money that would certainly be needed to support the families of people who lose their jobs and to meet benefit obligations- health care, pensions, etc.

While I do admit and agree that GM’s, perhaps including Ford’s and Chrysler’s failures, pose some level of systemic risk, bailing them out (in the meantime) does not relieve them of the inefficiencies that currently exist in their systems. Receiving the bailout funds would only permit them to continuously fund their insanely quick cash burnout rate. For the 3rd quarter, GM used a whopping $6.9bn or $2.3bn a month while Ford reported the figure $7.2bn.

Furthermore, bailing these companies out run opposed to the concept of free markets where market forces freely determine the survival of companies- those well-run strive while the inefficient ones fail. Some may bring up the bailout that was provided to the financial institutions, raising the issue of fairness. Fair enough. However, financial institutions ARE financial institutions. They are the ones that lend out, in effect, fueling economic growth from both the supply and demand side. These institutions are the ones that allow producers to acquire inputs to create outputs and they are the ones that fund consumer expenditures. Moreover, financial institutions serve as the source of credit lines to purchase cars and car parts, and fund the expenditures of automakers. In that sense, the latter only fall second to the former in terms of relevance.

If not bankruptcy of the three and the demise of its suppliers, other options exist for everyone: use the government money to support the SUPPLIERS/makers of car parts as well as their people. While an equivalent of a bailout, they remain more deserving of help than the automakers themselves; they are not the root of the problems. If not that, just let one of the companies fail (note: GM) and follow the Darwinian theory of survival of the fittest. At the moment, GM is the one facing the most danger and with so much changes that need to happen, a (short-term) bailout just won’t let them become better. A government bailout is simply an equivalent of throwing taxpayers’ money down the drain. Oh yeah, the $25 billiion agreed upon by the Senate today, I believe, does not come with strings attached. How’s that for a plan?

———————-

An excellent editorial written by Michael Levine, an NYU School of Law professorwas published on the Wall Street journal today. Entitled “Why Bankruptcy Is the Best Option for GM”, he argued that well, bankruptcy for the ailing General Motors is the best option for the automaker. Take note of the many interesting facts he cited with regard to GM’s inefficiencies and corporate contractual blunders.

General Motors is a once-great company caught in a web of relationships designed for another era. It should not be fed while still caught, because that will leave it trapped until we get tired of feeding it. Then it will die. The only possibility of saving it is to take the risk of cutting it free. In other words, GM should be allowed to go bankrupt.

Consider the costs of tackling GM’s problems with some kind of bailout plan. After 42 years of eroding U.S. market share (from 53% to 20%) and countless announcements of “change,” GM still has eight U.S. brands (Cadillac, Saab, Buick, Pontiac, GMC, Saturn, Chevrolet and Hummer). As for its more successful competitors, Toyota (19% market share) has three, and Honda (11%) has two.

GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000. These fewer and larger dealers are better able to advertise, stock and service the cars they sell. GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. It would cost GM billions of dollars and many years to reduce the number of dealers it has to a number near Toyota’s.

Foreign-owned manufacturers who build cars with American workers pay wages similar to GM’s. But their expenses for benefits are a fraction of GM’s. GM is contractually required to support thousands of workers in the UAW’s “Jobs Bank” program, which guarantees nearly full wages and benefits for workers who lose their jobs due to automation or plant closure. It supports more retirees than current workers. It owns or leases enormous amounts of property for facilities it’s not using and probably will never use again, and is obliged to support revenue bonds for municipalities that issued them to build these facilities. It has other contractual obligations such as health coverage for union retirees. All of these commitments drain its cash every month. Moreover, GM supports myriad suppliers and supports a huge infrastructure of firms and localities that depend on it. Many of them have contractual claims; they all have moral claims. They all want GM to be more or less what it is.

And therein lies the problem: The cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time.

GM’s solution is to ask the federal government for the cash that will allow it to do all of this piece by piece. But much of the cash will be thrown at unproductive commitments. And the sense of urgency that would enable GM to make choices painful to its management, its workers, its retirees, its suppliers and its localities will simply not be there if federal money is available. Like AIG, it will be back for more, and at the same time it will be telling us that it’s doing a great job under difficult circumstances.

Federal law provides a way out of the web: reorganization under Chapter 11 of the bankruptcy code. If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM’s viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn’t be easy but, unlike trying to bail out GM as it is, it wouldn’t be impossible.

The social and political costs would be very large, but if GM fails after getting $50 billion or $100 billion in bailout money, it’ll be just as large and there will be less money to soften the blow and even more blame to go around. The PBGC will probably need money to guarantee GM’s pensions for its white- and blue-collar workers (pension support is capped at around $40,000 per year, so that won’t help executives much). Unemployment insurance will have to be extended and offered to many people, perhaps millions if you include dealers, suppliers and communities dependent on GM as it exists now. A GM bankruptcy will make addressing health-care coverage more urgent, which is probably a good thing. It would require job-retraining money and community assistance to affected localities.

But unless we are willing to support GM as it is indefinitely, the downsizing and asset-shedding will have to come anyway. Even if it builds cars as attractive and environmentally responsible as those Honda and Toyota will be building, they won’t be able to carry the weight of GM’s past.

GM CEO Rick Wagoner says “bankruptcy is not an option.” Critics of a bankruptcy say that GM won’t be able to get the loans it will need to guarantee warranties, pay its operating losses while it restructures, and preserve customers’ ability to finance purchases. While consumers buy tickets from bankrupt airlines, electronics from bankrupt retailers, and apartments from bankrupt builders, they say consumers won’t buy cars from a bankrupt auto maker. But bankruptcy no longer means “liquidation” or “out of business” to a generation of consumers used to buying from firms in reorganization.

GM would guarantee warranty support with a segregated fund if necessary. And debtor-in-possession (DIP) financing — loans that provide the near-term cash for reorganizing companies — is very safe, because the DIP lender has priority over all other claimants. In normal markets, it would certainly be available to a GM that has assets to sell, including a viable overseas business. Such financing is probably available even now.

In any event, it would be lined up before a filing, not after, so any problems wouldn’t be a surprise. As a last resort, we could at least consider a public DIP loan to support a reorganizing GM with a good chance to survive — as opposed to subsidizing a GM slowly deflating.

The fate of Daewoo — the Korean auto maker that collapsed in 2000 after filing for bankruptcy, leaving about 500 dealers stranded in the U.S. — is often cited as “proof” that a GM bankruptcy won’t work. But Daewoo was headquartered in a part of the world where bankruptcy still carries a major stigma and usually means liquidation. Daewoo’s experience is largely irrelevant to a major U.S. company undergoing a well-publicized positive transformation, almost certainly under new management.

GM as it is cannot survive without long-term government life support. If it gets that support, it can’t change enough and won’t change fast enough. Contrary to Mr. Wagoner’s brave declaration, bankruptcy is an option. In fact, it’s the only option that merits public support and actually has a chance at succeeding.

Two senators: a Democrat, a Republican.

One a victor, another a fighter.

After two years of campaigning, a day of voting and hours of waiting, one finally wins as the new president.

—–

John McCain’s speech last night, as he conceded the presidency to Barack Obama (D-Il.), was no doubt the best he has given since eternity. Despite the occasional boos from the crowd, there was nothing but nobility, sincerity, and elegance in his speech. Coming to the election, most expected an Obama victory, and quite appropriately so. McCain’s defeat, or the GOP’s for that matter, may be attributed to a lot of different factors that worked to Obama’s advantage. The economy, the much loathed Iraq war, and more importantly, the way the campaign was run. Even I got sick of his Joe the Plumber tactic… and Palin, boy oh boy. Yes, she is charming, articulate, and even hot. But there was just so much about her actions that completely killed those complements. It might be better not to list them down.

McCain is far from the ideal GOP candidate, particularly when one goes head to head against the ever eloquent and disciplined Obama. But how the GOP candidate’s advisers and staff handled things simply made things worse- many times made him and his running mate such laughing stocks. Even with a well-run campaign, I believe Obama still would have won. But the lead also wouldn’t have been that brutal. With even less than half the electoral votes, that tells you it was more than people’s want for “change” that brought the tandem down. Their very own strategies and faux pas ate them alive.

On the other hand, Barack Obama was admittedly a well-educated, eloquent, and pro-middle-class man. His talent for delivering effective and inspirational speeches undoubtedly drew people in; even the red states. One can’t help but have respect for a man like him who is able to give hope to people just when it seems that all has faded. Having said that, he is not my candidate because of the ideologies he stand for. Labeled as one of the most liberal among the liberals, that’s just a complete turn off. As a conservative, I refuse to succumb to the ideas of higher taxes, big government, gay marriage, and pro-life. With the looming tax hikes, I fear and worry for corporate America’s future. But I’d look past that, in the name of a better America. He better deliver. He better set aside partisanship and move 2, 3, 4 steps to the right of ideological spectrum. He needs to shift to the center.

With the depressing economic conditions, maybe he is what the people want, what the market wants. For as long as people wake up to a much better economy by January 2012, where both the middle class and corporate America thrive, I shall not complain.

Moving on to the remarkable speeches given last night, one of concession and the other of election, here are their videos:

John McCain (R-Az.)

Barack Obama (D-Il.)

Both said it best- there is no better strategy for progression than efforts where partisanship is set aside and the red and blue working together.

PS. MSNBC claims they’re THE place for politics. Well, not during primetime. Because they are rather a breeding ground for liberal pigs.

So what’s new in the market this week? Not much on the overall state of the economy but some can be picked up from the specifics relating to it. Yesterday, the Federal Reserve cut its rates by 50 basis points to 1%- simply what the market expected. If this was of any use, it simply prevented a bigger drop in the stock market that could have followed if the Fed refused to follow expectations. From a credit market standpoint, there’s not much to be gained from such a cut. Yes, perhaps it widens earnings potential for banks or prevents a deflationary environment. But it still does not quite solve the problem of liquidity. On the contrary, it potentially reduces it. As people find higher earnings from investing in bonds and stocks, particularly that a lot of the latter have been beaten heavily lately, they tend to move in that direction. That doesn’t include those who remain fearful, and thus keep their cash under their beds. I might be missing the point in not seeing the value of a rate cut, if any; so please let me know if I did.

Tuesday saw the second biggest point gain ever. The Dow quickly picked up from an average of about 200 points up north to as much as 905 points just minutes before the closing bell. The index ended at 9065, up 889 points. The market would have seen the biggest 2-day gain (ever?) had the rally persisted yesterday. It saw more than thousand-point travel to the north, up as much as 230 points, only to wipe it out within the last few minutes when it closed 17 points lower. (Nasdaq however was alone in closing on a positive note.) That could be yet again hedge fund redemptions, the Fed’s rate cut or people selling the rally. Tuesday’s gain saw my portfolio ALL green. Pretty. These are not positions I own; I just simply follow them.

All green!

I thought Morgan Stanley was going to disappoint me. For some time, it was the only one on the red.

Today was another good day. The market closed up 189.73 points. The market was kinda quiet; not much volatility going on. If I remember it right, the time it spent on the negative was negligible. All throughout, it was hovering around 50-150 points up. Given how the market played the last few minutes prior to market close, I was fearful there would be another massive selling. I wasn’t really expecting for another big rally, even half of what we saw on Tuesday. But 189 points, not bad. Not at all. Tomorrow’s Friday and what better way to end the week than to see the third rally for the week? I believe the government releases unemployment figures tomorrow. Similar to the rate cut, there are hovering expectations. Despite that, it could potentially destroy the confidence somewhat gained the past 3 days. The government reported GDP “growth” today. With a decline of 0.30%, better than expected, the market apparently just shrugged it off.

Two transactions worth pointing out: the planned merger between Delta Airlines (DAL) and Northwest Airlines (UAUA) finally comes to fruition and the one between General Motors (GM) and Chrysler is still cooking. (It might be better for me to create a separate entry about my 2-cents on the GM-Chrysler merger.)

Some more news tidibits:

• South Korea also cut its rates by 75 basis points on Tuesday.
• The Fed provided a $120bn swap line to Brazil, Mexico, Singapore and South Korea.
• Commercial banks borrowed $110bn while investment banks took $80bn from the government discount window last week.
• 3-month LIBOR fell to 3.19%. Remember it was up as much as 4.9% just several weeks ago.
• A town in Alaska is still paying more than $4 per gallon for gas; in Texas, price goes as low as $1.79.
• Big wigs of Merrill Lynch still fighting over positions. Thain, McCann, Montag and company.
• Oil at 65.30 per barrel.
• The government has bought more than $130bn worth of commercial paper since Monday.

So whether we’ll see a 3rd rally for the week or not is unknown. Let’s all be hopeful.

Monday marked the 2nd time that the week began on a positive note, after last week’s record rally of 936.42. And yesterday and today also marked the 2nd time that the rallies were followed by plunges. It was another 514-point decline to the Dow, bringing the index to its 5-year low. Intraday trading even saw the Dow fall as much as 698 points just moments before the closing. Only shows you that last week’s high was indeed a simple bear rally. The bottoming is not yet over.

Everyone’s fearsome right now of the looming recession or one that’s already begun. Demand for commodities have declined, even from China, which reported a GDP growth of just 9.0, way below the 9.7 expected. And that’s a single digit growth rate for you. BHP Billiton, Australian-based steel company, reported negative outlook on the demand from China. Germany, as the world’s biggest exporter, also softens its growth forecast for 2009. The country’s exports account for as much as 41% of its GDP and such an outlook for the coming year is indeed a sign of what is to come. This is particularly risky for emerging markets, which are less stable. Latin American countries in particular are facing tough times. Argentina’s government decision to nationalize its pension funds may be looked at in two ways. The government claims it is to protect the funds for future generations while some say it is to fund its spending and public works. Some fear that the country is at the brink of defaulting.

With the economic slow down comes weakening currencies. As the investing public becomes more and more fearful, where do they run for safety? To the US and its currency- the main reason behind the dollar’s big appreciation against major currencies including the Euro and Sterling. So what trading options does one have?

Since everyone’s bullish on the dollar, how’s Powershares DB US Dollar Index Bullish (UUP)? One warning: it has been appreciating so much the past several days, it might not see so much growth anymore. Just how much has it grown? Euro to dollar used to be at 1.50-1.60. Now, it’s at 1.2858- a low from early 2007. Remember when the pound stood at twice the value of dollar? Now it’s at 1.6268. People are still bullish on Yen so that might be a good trade; dollar to yen is at 97.865. And of course, emerging market currencies are also another opportunity. Short.

The Dow has gone down a lot and we might see a little rally soon. But if indeed the bottoming is not yet over, there’s DXD, an ETF that shorts on the Dow30 and a way for one to hedge. Its S&P component is SDS.

If you’re following the major countries tumble and want to make money, one can short EWG- an ETF for Germany, EWY for South Korea, and EWZ for Brazil.

I am glad that ratings agencies are finally under fire. The hearing today at the Congress sure did give them what has long been due. While regulations might have begun the crisis, the works of rating agencies undeniably exacerbated things rating assets as if they were safe to own.

Earnings continue to be laid in front of us. Amgen, Amazon, Northwest Airlines, ConocoPhillips, Merck, and McDonald’s all beat analyst’s expectation while Boeing, AT&T, and Wachovia disappointed. Apple and Yahoo released their earnings yesterday and AAPL earned 15 cents higher than expected while YHOO was in line. Others to report tomorrow are Bristol-Myers, Burlington Northern, Credit Suisse, Eli Lilly, Iberdrola and Microsoft.

Recently, a big range of movements on the Dow has become typical. Last week saw the Dow move within a 1200-point range after the worst week ended lower by as much as 21%. Monday’s rally was easily wiped out by the two days that followed after hedge fund redemptions, lower economic figures reported and fear continue to surround the markets.

Today was another busy day. The Dow played within an 800-point range- from being down by as much as 400 points early in the day only to rally in the last hours of trading to finally settle higher by 401 points. S&P and Nasdaq expectedly followed suit with 4.25 and 5.50 percent increase, respectively. Interestingly enough, the VIX recorded another all-time high when it peaked at 81 points before settling at 67.61. It has a lot to do with the puts and calls that are being traded, and the contracts expiring within the next few days. It’s something I still have to educate myself a lot with.

The big move to the north today may be attributed to several things: poor economic reports on Philadelphia’s Fed report, Morgan Stanley’s John Mack’s first appearance since the crisis broke out, some better than expected earnings released today (details below), and the YHOO-MSFT deal’s emergence.

In an interview by CNBC’s David Faber, Mack admitted that: yes, banks indeed have been overly leveraged; yes, there is the need for a central clearing market for the derivatives that thrive on opacity; and yes, some of the money the US government will be injecting to their system will be used to deleverage. It was a rather comprehensive interview. He also went on to say that the ongoing crisis is something he had never seen before because of its global nature alongside the fact that credit markets have dried up. Watch more of it here.

The markets also faced earnings reports from various financial and non-financial institutions. As expected, banks released negative figures, although some of them beat market expectations.

Merrill Lynch reported a third-quarter net loss of $7.5 billion on Thursday resulting from write-downs and credit losses on complex debt securities. Loss of 5.56 per share is much lower than the 5.22 The sale of its 20% stake at Bloomberg earned the firm $4.3 billion of pretax gains and that definitely helped the slightly higher than expected earnings.

Citigroup similarly posted Q3 net loss of $2.82 billion, or 60 cents per share, compared with a profit of $2.21 billion, or 44 cents, a year earlier. It slightly beat analysts’ expectations of 70 to the red on revenue of $19.42bn. Actual number fell 23 percent to $16.68 billion.

Citigroup became the second US bank by assets, after JP Morgan which has assets worth $2.25 trillion compared to Citi’s $2.05 trillion.

Other numbers: JP Morgan Chase’s quarterly profit fell 84 percent to end at 6 cent per share vs 29 cents forecast. Wells Fargo reported net income of $1.64 billion, or 49 cents per share, from last year’s $2.17 billion, or 64 cents; an EPS of 34 cents PS was expected.

A couple of tech stocks also came out with reports. IBM released an EPS of $2.05, 2 cents higher than expected. The higher revenue, which stood at $25.3bn was partly a result of 8% increase in the global tech and business services arm of the firm. Google, on the other hand, had a much higher earnings of $4.92 vs. 4.76 forecast. This is in lieu of more than 80% share on web searches and increased earnings from its online advertising business AdSense.

An interesting piece of information I got today relates to the Fed’s balance sheet. It rose to $1.80 trillion by as much as $882bn. Commercial banks borrowing moved up by $3.8b to $101.9bn while investment banks has so far taken $133.9bn in the latest week, up by $11bn. A big chunk of all the borrowings apparently came from the last several weeks since the bail out plan was released. The more detailed break down of the $882bn increase is as follows:

• Term Auction Facilities- $263bn

• Investment Banks- $133.9bn

• Money Market- $122bn

• Discount Window To Banks- $101.8bn

• AIG- $82.8bn

• Bear Sterns- $29.5bn

And this is how things work: The Treasury issues securities to the public, in effect collecting cash, which is then passed on to the Fed. Now the Fed loans this to the banks in exchange of mortgage-backed securities and other troubled assets with collateral. When banks lend out, voila, the money is back to the public.

Having had lunch at one cafe in school allowed me to catch a glimpse of some news on TV. It was interesting enough to have caught a report about marriage in the United States for 2 consecutive days. Yesterday, it was reported that in a span of 7 years (?), the number of couples getting married declined by 20% and co-habitation is now at a rate of 80%. In today’s news, viewers sent their opinions and the following were just some of them:

• It is becoming socially acceptable to have children out of wedlock. So why get married when there’s no need?
• One guy, after going through 3 divorces, already thinks marriage is not worth it (SURPRISE!)
• Marriage is merely a glorified and expensive pinky-promise.
• (If I understood it right…) Filing your ITR individually, rather than as a couple, actually increases your rebate and this allegedly makes for good (economic) argument against marriage.
• A guy said his grandparents celebrated their 50th and his parents are about to celebrate their 25th. Thus, he would want to have his own wedding and break some records. (Glad to hear!)

Three of the views above only prove the gravity of are and how rare is it for you to see people who still believe in the value of marriage. One guest in the show yesterday said that people now have more fears of getting married due to the growing statistics of people getting divorced. As a result, they just resort to co-habitation, where they don’t get tied down. There’s no commitment.

I don’t know what else to make of this. As someone who was brought up as a Catholic with my own view of the sacrament of matrimony, its value and sacredness, it is difficult to be impartial hearing things like this. It is not fair to blame the country and say it is not a good place to settle down and start your own family. Rather it is in the people who are involved and the society itself that creates pressure among everyone else, giving the impression that marriage is almost sure to fail. I hope I don’t see that day when marriage becomes a societal taboo because the society dictated it to be so. Legalization of gay marriage, departure from heterosexual marriage, co-habitation, and either children out of wedlock or abortion… Something must be terribly wrong with this country.