AIG, Lehman, and Merrill under a Harvest Moon: Parallels to the Panic of 1907
Yesterday’s stock market selloff on the Harvest Moon illuminated the fear (Saturn) and dislocations (Uranus), from a lack of transparency (Full Moon in Pisces), that eroded investors trust, resulting in the largest bankruptcy (Pluto) filing in U.S. history. It illustrated how rapidly financial cycles can descend from feast to famine.
Pluto rules debt. In the global sign of Sagittarius since 1995, it reflected how Wall Street and the world gorged on the low hanging fruit, piling up the leverage (debt) in exchange for future profits of a field left uncultivated. Pisces and its planetary ruler Neptune rule credit which means “to believe,” and the accumulation of debt was based on the belief that assets such as real estate would continue to increase in value. Like the medieval alchemists who sought to turn base metal into gold, the wizards of Wall Street bundled lower quality mortgages and other assets into various financial instruments. The party was over when Saturn in Leo opposed Neptune last year, bursting the credit bubble.
Now the field is considered a distressed asset worth far less than it once was. Like a fog (Neptune/Pisces) that obscures the ability to see clearly, no one really knows what these assets are worth. Since Saturn’s arrival in Virgo last September, analysts and accountants began mark to market asset writedowns, spouting out all kinds of valuations. The meltdown had begun in many financial stocks. Short sellers, many who were naked, piled in and the lower the company’s share price became, the greater the limitation (Saturn) on the company’s ability to raise capital. The drop in share prices triggered downgrades by the ratings agencies, which further triggered the need to raise more capital.
Without the ability to raise capital, get government aid, or find a buyer, there was no choice left but to file for bankruptcy. Such was the fate of Lehman Brothers (LEH), a firm that began 150 years ago as a cotton trader, whose shares closed Monday at 21 cents. Perusing the list of Lehman’s top 30 unsecured creditors starting on page 7 in the Chapter 11 filing, provides a snapshot of the magnitude Lehman’s downfall will have on markets worldwide.
John Thain saw that discussions involving Bank of America (BAC) and Barclays Bank (BCS) buying Lehman were not going well. Thain was brought in less than a year ago to clean up Merrill Lynch’s (MER) balance sheet. Rather than wait for Lehman to go under which would in turn sink his ship, Thain called up Ken Lewis Saturday morning and asked if he’d like to buy Merrill Lynch. By Sunday evening Bank of America agreed to buy Merrill in a $50 billion dollar all stock transaction. Last month’s Leo Solar Eclipse conjoined Lewis’ Pluto reflecting his eagerness to do another acquisition. With Uranus conjoining his natal Mercury, Lewis wanted to quickly get a deal for Merrill under contract. Lewis noted during yesterday’s conference call discussing the deal that he predicted seven years ago that one day a commercial bank would own an investment bank. But that’s for both companies’ shareholders to decide; clearly the market wasn’t moved as Merrill closed up a penny from Friday to $17.06. The Harvest Moon conjoined Bank of America’s stock chart Jupiter indicating the bank’s expansion, and Pluto challenges the bank’s Venus reflecting its lower value from taking over the assets of other financials.
And in the midst of the crisis befalling the investment banks, American International Group (AIG) is on the brink. Though difficult to decipher the exact concern, it appears that ratings agency downgrades could force AIG to put up collateral for certain credit default swaps (CDSs). The market fears that AIG does not have enough available capital to satisfy all of the CDS collateralization that would be required. The amount of new capital that would satisfy the rating agencies is increasing by the day; what started out at $40 billion has rapidly increased to $75 billion. Transiting Pluto conjoining AIG’s stock chart Neptune reflects AIG’s rapidly dissolving capital base, which could ultimately dissolve the company. As Ken Lewis said yesterday, “I don’t know of any major bank that doesn’t do business with AIG.” A collapse of AIG would have worldwide ramifications.
A number of factors converging at this time link back to the “Panic of 1907,” a financial crisis also precipitated by rampant market and real estate speculation. That crisis began on the Pisces New Moon of March 14, 1907. Pisces rules speculative bubbles; the New Moon conjoined Saturn and challenged Mars in Sagittarius and Pluto in Gemini, indicating that rapidly declining real estate values sparked a massive market selloff. These planetary energies were accentuated as they impacted Mars and Neptune in the USA horoscope. The crisis was abated after financier J.P. Morgan stepped in to provide liquidity for the markets, which led to the creation of the Federal Reserve System in 1913.
Exactly 101 years later a “run on the bank” caused the government facilitated fire sale of Bear Stearns to JPMorgan (JPM). Pluto (lending) in Capricorn (government) opposed the 1907 Jupiter, reflecting the large ($29 billion) term financing the government provided for JPMorgan to acquire Bear.
With Jupiter and Pluto moving stationary direct* at the First Quarter Moon last week, as predicted the Treasury stepped in and took conservatorship over government-sponsored enterprises (GSEs) Fannie Mae (FNM) and Freddie Mac (FRE), after foreign governments and sovereign wealth funds demanded the Treasury step in to protect their investment in GSE debt.
Jupiter moving direct opposing both the USA’s and President Bush’s Cancer Sun, reflect that the Administration was ready to ratchet up moral hazard by refusing to give assistance to Lehman and AIG. Saturn challenging the USA Ascendant** indicates that this ideological stance is likely to adversely affect the entire nation. Nevertheless, the Federal Reserve announced Sunday that it will now accept equities as collateral at its lending facilities established since the financial crisis. And the helicopters dumped $70 billion in additional liquidity yesterday, the largest drop since 9/11.
With Pluto energies stationary through September 16 and yesterday’s Pisces Full Moon and Uranus conjoining the 1907 Panic New Moon and the USA’s Mars/Neptune alignment, it was more of a surprise that the major indices didn’t fall further than they did. Saturn in Virgo is about to make a series of oppositions to Uranus in Pisces through mid-2010, creating shocks and disruptions in order to bring change to the structure of the financial system. Between now and early next year, the Saturn/Uranus opposition will reactivate the planetary energies prominent during the panic of 1907. Pluto will re-enter Capricorn in November until 2024, reflecting the death and decay financial and government structures must undergo in order for massive transformation to occur. With Saturn and Pluto in earth signs, it’s time to roll up our sleeves and start digging into the field’s soil.
*When a planet appears from Earth’s vantage point to be stationary its energies are increased.
**The Ascendant, is the zodiac sign rising on the eastern horizon upon the birth of the USA (July 4, 1776 5:10 PM Philadelphia, Pennsylvania). The USA Ascendant is in Sagittarius, a sign ruled by Jupiter, the planetary ruler of the USA horoscope. The USA’s Jupiter in Cancer reflects the nation’s emphasis on real estate (Cancer) as a way to expand wealth (Jupiter).
Posted 9/16/2008 11:07:00 AM