From: Lowenthal, Albert
Sent: Oct 24, 2008 8:47 AM
It has never been more difficult to come to work and face overnight market reports and the continuous cacophony from market pundits telling us how the world as we know it is coming to an end. This morning, we face markets that were down 7-10% around the world in the overnight, the Japanese yen at new highs versus every currency (only slightly ahead of an increasing U.S. dollar) and U.S. stock futures down the limit, projecting an opening down more than 6%. Meanwhile, commodities are dropping like a stone with oil down, despite OPEC announcing a cut in production.
Commentators are saying that "Wall Street is wallowing in despair after being beyond the panic stage." The fundamental problem of a seized credit market is being resolved by the infusion of capital and guaranty of liquidity to the system. While we are in a recession of unknown duration, the world is in fact not coming to an end. Stock prices have gone beyond predicting a period of weaker earnings and now only reflect unremitting selling pressure without committed buyers. We need to recognize that unwinding of leverage is a painful process and that it is taking place in real time. Margin selling by hedge funds, individual investors and corporate chieftains is creating indiscriminate selling of financial assets with sellers focused on where they can get bids, as opposed to selling positions that they don't believe will perform. While there is no way to predict the bottom for markets, many indicators show that it is not far off.
For each of us, it is essential to focus on what needs to be done, and not stare at our screens or at CNBC. We need to reach out to clients and calm their frazzled nerves. We need to point out that they should remain committed to their investment thesis. They should look for tax swaps to assure they don't pay taxes on gains that were taken earlier in the year and are more than offset by current unrealized losses. Most important, they should look at the values that have not existed for a generation in high grade municipal yields, stocks in the highest quality companies with strong franchises and strong balance sheets, and in taxable fixed income securities that offer compelling value.
I also am aware of our employees' concern over the price of Oppenheimer Holdings (OPY). It is held by many of you in the 401-k Plan and in your personal accounts. We do not believe it reflects our business value in current terms, and certainly not in future terms. The stock may trade lower on margin selling in the immediate future but we will be reporting earnings on Thursday of next week and that an update on our business is likely to help the markets evaluate the company and its prospects
Hang in there. TGIF