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Finding the the next shoe to fall is how you make a big fortune out of wall street’s packet.

Lehman: More Real-Estate Woes
LEHMAN BROTHERS’ REAL-ESTATE PROBLEMS, including an equity stake in the leveraged buyout of apartment developer Archstone-Smith, continue to plague it.

The firm, which stunned Wall Street last week by disclosing that it expects to report a second-quarter loss of $2.8 billion, or $5 a share, appears to have $65 billion to $70 billion in mortgage and real-estate exposure. That’s quite hefty, but it’s down from $87 billion on Feb. 29. Lehman also said that it had raised $6 billion in equity to shore up its capital base.

New York-based AIG — the world’s biggest insurer with $1.05 trillion in assets — lost $7.8 billion during the first quarter of the year due to investments and contracts tied to bad loans. The insurer’s first-quarter deficit was even more massive than its fourth-quarter loss of more than $5 billion. After its two straight quarterly losses, AIG revealed plans to raise $20 billion in fresh capital — but investors reacted skeptically, unsure that extra cash would solve the insurer’s problems.

Shares of AIG have fallen by more than 50 percent over the past 12 months, closing at $34.18 on Friday.

Merrill:European Bks May Need To Raise $110B In Capital-Bloomberg

Last Update: 6/13/2008 9:10:33 AM

DOW JONES NEWSWIRES

European banks may need to raise as much as $110 billion in fresh capital to
offset a slowing of earnings growth linked to U.S. subprime problems, Merrill
Lynch & Co. (MER) says, Bloomberg News reported on its Web site Friday. So far,
the banking group has raised about 50% to 60% of that total, Merrill said in a
note to clients. Also, Merrill said banks have written down about 85% of the
losses stemming from the global credit crunch. Full story at
www.bloomberg.com/apps/news?pid=newsarchive&sid=aTI69rcu7WEY

Merrill Lynch & Co., Inc. (MER) and Morgan Stanley (MS) kind of in the similar situation as LEH. AIG, MER, and MS will probably be the next BS or LEH if the loan business ends up much worse(and it will). For any of reasons, you should put these stocks into your short list for your own benefit. There are alot of factors are hurting the banks and brokers firms

Gazprom CEO’s $250 Oil Forecast Deals Doom Options Traders Love

By Michael Janofsky

June 16 (Bloomberg) — At $250 a barrel for crude oil, food prices double. The U.S., Japan and Europe plunge into deep recession. Companies go bankrupt. Airlines are nationalized. Sport-utility vehicle sales dry up as gasoline tops $7 a gallon.

The scenario may not be unimaginable. Alexei Miller, chief executive officer of OAO Gazprom, the world’s biggest natural- gas company, said June 10 that crude will climb to $250 a barrel in the “foreseeable future.” Prices may reach that level only after a war or attack on major oil installations, says Jeff Spittel, an analyst at Natixis Bleichroeder Inc. in New York.

While executives, elected leaders and economists disagree on the probability of Miller’s vision, there is consensus that the price would jolt everyday life.

“It would be a disaster for all the oil-importing countries, all the democracies and China,” says James Woolsey, vice president of consultant Booz Allen %26 Hamilton Inc. in McLean, Virginia, and a former Central Intelligence Agency director. “And it would be hugely beneficial for the many monarchies and dictatorships that are the main suppliers.”

Some investors are already betting on Miller’s forecast. At least 3,008 options contracts have been purchased giving holders the right to buy oil at $250 a barrel in December, data compiled by Bloomberg show. The options closed at 64 cents on June 13.

Rising oil costs have been responsible for a third of global food inflation since 2004, according to London-based research firm New Energy Finance.

“At $7-a-gallon gasoline, you’re probably looking at food prices almost double,” says Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.

`Massive Shutdown’

Crude oil prices reached a record $139.12 a barrel on June 6, more than double what they were a year earlier. Goldman Sachs Group Inc. and Morgan Stanley forecast the cost may reach $150 in the next few months.

At $250, “there would be a massive shutdown of companies,” says Carlos Mattei, procurement vice president for glassmaker Vitro SAB in Monterrey, Mexico. “Many of these small companies have to choose between paying the gas bill or payroll.”

Still, slowing demand may curb prices. The International Energy Agency, an adviser to 27 oil-consuming nations, last week cut its forecast of world oil use for a fifth month as record costs dented consumption. The U.S. Energy Information Administration expects prices will drop to $120 by December 2009.

“Over a decade or more, after you adjust for inflation, if the price doubled, we would expect demand to fall by 30 percent,” says Douglas MacIntyre, the agency’s senior oil market analyst. U.S. oil consumption fell 5.7 percent from 1973 to 1975 as the Arab oil embargo led to import shortages.

`Incredibly Vested Interests’

Tom Kloza, chief oil analyst for the Oil Price Information Service in Wall, New Jersey, is skeptical about Miller’s prediction because it may benefit Gazprom.

“It’s silly to take people with incredibly vested interests as having an unfettered, unbiased opinion,” Kloza says.

Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, says the firm’s economic models break down if the price of oil goes over $200 a barrel.

“The U.S. goes into deep recession, as does most of Europe and Japan, and that takes much of the developing economies with it,” he says. “I don’t see how we get to $250 because the economy is broken long before that, and demand falls and that causes prices to fall.”

Oil at $250 would slash the growth of U.S. gross domestic product by about 2.5 percentage points, says Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts.

Nationalized Airlines

The U.S. may be forced to nationalize airlines if oil keeps rising, Barry Sternlicht, founder and CEO of Starwood Capital Group LLC, told a hotel conference June 2 in New York. Carriers won’t be able to raise fares enough to cover costs, requiring government subsidies to make tickets affordable.

“I’m not sure the model that the airlines are in right now is going to work unless the U.S. does what many other countries have done,” Sternlicht says.

US Airways Group Inc. would need an average fare of about $1,000 per round trip to break even with oil at $250, President Scott Kirby says. That’s more than triple the current average of $300. Fuel accounted for 31 percent of US Airways’ 2007 operating expenses.

Automakers would be devastated, says Daniel Coker, CEO of Northville, Michigan-based Amerigon Inc., a supplier of parts that heat and cool car seats.

“Well, $250 per barrel would cripple the auto industry,” he says.

Transportation Reduced

Households will cut back on transportation, says John Wolkonowicz, an analyst at Global Insight.

“You certainly won’t see mom hauling around the kids in a Chevy Suburban,” he says.

Imports of smaller cars accounted for 23 percent of U.S. auto sales in 1980, up from 15 percent in 1972, according to Ward’s Automotive Reports, which tracks vehicle sales.

At $250 a barrel, even energy-producing states would cut services, New Mexico Governor Bill Richardson said in an e-mail.

“It’s not clear that the additional revenue would enable us to meet the inflationary impacts that this would impose on road construction, school lunches and even public safety,” he said.

To contact the reporter on this story: Michael Janofsky in Los Angeles at mjanofsky@bloomberg.net.

Last Updated: June 15, 2008 12:21 EDT

Housing, inflation getting worse, data to show

WASHINGTON (MarketWatch) — The economy is being squeezed by higher prices on one hand and by a collapsing housing market on the other. Neither problem seems to be getting any better in May, economists said ahead of key economic data in the coming week.

http://www.marketwatch.com/news/story/housing-inflation-getting-worse-data/story.aspx?guid=%7B307C3018%2D831A%2D4D98%2D9576%2DD591FE2EF48C%7D&dist=MostReadHome

Economy forces major shift in spending

Consumers stay home and opt for frozen foods, Spam and crafts

As consumers muddle through all that is plaguing the U.S. economy, they have battened down the hatches and sharply shifted their spending habits, turning to money-saving options that run the gamut from transportation to health as they find ways to pay for dramatic increases in gasoline and food.

The shorter the timeline you are looking at the market the harder it is to make sense from the outside Main Street point of view. The active traders (those on the floor or trading heavily from home) are not looking at the economy as normal investors. After all, the economy is not going to change in the course of a couple minutes. The trader’s idea is to make money off of little moves dictated by order flows and imbalances in supply and demand. Over longer-term time periods government or private group reports impact more and of course Finance 101 will tell you the key to any stock price is earnings. So far tonight the S/P has been up 1.75 and down 1.75. My predictions are based on the close who wins bears versus bulls. After all if noone bought the market would go down to zero (that is not going to happen if for no other reasons than for circuit breakers).

What a lot of posters are trying to say (in my opinion) in different ways is that earnings will NOT be helped by the current situation. Inflation will impact lending rates and there will be a reallocation of funds into bonds. As long as there is greater demand than supply commodities will benefit thus causing companies to spend more for raw materials and they will have to decide to raise prices to protect earnings (more inflation) or hold their prices and show a lack of growth. You guys are seeing how inflation works its way into the general economy.

Back in the 70s inflation was easier to stop from wage controls (WIN - Whip Inflation Now buttons) to 18% prime rate. That stopped inflation in its tracks although that hurt alot. Today it’s a different ballgame. You can raise rates, but the global economy is a lot different and if you want crude you will have to outbid the next country regardless how much your economy is hurting.

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