Floor Trader Describes Wall Street Gyrations It's been a roller-coaster day on Wall Street. New York Stock Exchange floor trader Ted Weisberg, who is president of Seaport Securities, says it has been like a camel's hump — the Dow Jones industrial average was up, then down, then up again before closing nearly 200 points down.
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Floor Trader Describes Wall Street Gyrations

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Floor Trader Describes Wall Street Gyrations

Floor Trader Describes Wall Street Gyrations

Floor Trader Describes Wall Street Gyrations

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It's been a roller-coaster day on Wall Street. New York Stock Exchange floor trader Ted Weisberg, who is president of Seaport Securities, says it has been like a camel's hump — the Dow Jones industrial average was up, then down, then up again before closing nearly 200 points down.

MELISSA BLOCK, host:

This is All Thing Considered from NPR News. I'm Melissa Block.

BLOCK: National Hockey League Commissioner Gary Bettman rang the opening bell at the New York Stock Exchange today, and so began the latest face-off between buyers and sellers. And to extend that hockey metaphor, it was a day with a lot of end-to-end play. The Dow veered back and forth between positive and negative territory. For a sense of what was going on at the New York Stock Exchange, I checked in throughout the day with trader Ted Wessberg. He's president of Seaport Securities.

BLOCK: Ted Weisberg, we're calling you just after 11 o'clock; what's the morning been like so far?

Mr. TED WEISBERG (President, Seaport Securities): Well, it's characterized with a lot of volatility, unfortunately most of it on the down side though the markets did open dramatically lower - sort of a knee-jerk reaction, I think, to both Asia and Europe. Then we climbed out of that hole, got to the plus side by about 100 points, thereabouts. And as we speak, we're now minus 129 points.

BLOCK: Yeah, if you look at a graph of the day, it's like an upside down V at this point. It goes up sharply, and then it goes down just as sharply.

Mr. WEISBERG: Yes and I think the volatility, basically, is just indicative of the fact that people just simply don't know what to do and so everybody is sort of sitting on the head of a pin, easily pushed one way or the other depending on the headline or rumor. You'd like to think that it's characteristic of a back market that's trying to seek a bottom, but it's a little early to make that determination.

BLOCK: I hear some laughter from traders behind you. Is there still a sense of humor on the floor at the stock exchange?

Mr. WEISBERG: Well, there's always a sense of humor. It's a gallows humor, for the most part.

BLOCK: What kind of gallows humor? What are you hearing?

Mr. WEISBERG: Well, I'm hearing, for example, that there are only two positions to take in this market: cash and fetal.

BLOCK: I see. Fetal position.

Mr. WEISBERG: Yes. Curl up in a little ball and hide 'til the storm passes. But like a thunderstorm, you know, this too will pass. This is really the time, probably, to do a little homework because there are probably some spectacular opportunities at the moment.

BLOCK: Well, Ted, as we close our conversation, the Dow is down about 120 points. We'll check back in with you in a little while.

Mr. WEISBERG: Great.

FRANK SINATRA: (Singing) Every time it rains, it rains pennies from heaven. Don't you know?

BLOCK: Hey there, Ted.

Mr. WEISBERG: Hi.

BLOCK: Well, it's just after 2 o'clock, about 2:20, and you've moved into positive territory.

Mr. WEISBERG: How about that?

BLOCK: Where's the Dow right now?

Ms. WEISBERG: We're plus - ah, 120.

BLOCK: And what do you think accounts for that? You were down 120 when we talked to you a few hours ago. What's going on?

Mr. WEISBERG: I call it the camel hump pattern.

BLOCK: Hmm. Which means?

Mr. WEISBERG: That the volatility, of course, has been extreme today. I mean, we've had up and down either way a couple of times, then therefore, the camel hump. But just perhaps, I mean, you don't know, there's no crystal ball but there's a rally in here somewhere and perhaps it will be this afternoon. It's quite possible that we could close up today - and close up big.

BLOCK: Well, the Dow is now up about 140. We're going to check back in with you after the closing bell, Ted, and see just how exciting your day ends up.

Mr. WEISBERG: OK. Thank you.

Mr. SINATRA: (Singing) May your sorrows all be small. Here's to the losers, bless some all.

BLOCK: OK, Ted, the markets have closed - and down, way down by the end. What happened?

Mr. WEISBERG: Wow. Yeah, not what I implied earlier in the day.

BLOCK: That's right.

Mr. WEISBERG: So much for 40 years of experience and knowing nothing.

BLOCK: Well, who's to explain what happened?

Mr. WEISBERG: Well, I don't know that there is a logical explanation, other than that it was clearly disappointing. The markets, when we spoke in mid-day and earlier in the morning, had all the earmarks of a market that was way oversold, and the action gave a lot of people - not only me - a huge head fake. But it gave us the confidence mid-day that we would probably close on the upside. So the fact that we closed down 200 is clearly not encouraging. I guess we are in for some more pain. We were doing pretty good 'til the secretary of the treasury went on TV, and I turned to a fellow trader and I said, gee, why can't they just not talk for a day?

BLOCK: You think that would help?

Mr. WEISBERG: That would give us all a break. And I don't want to blame him for - you know, it's probably not fair to do that - but there's no question that as soon as he started to talk, the market started to give back its gains and the selling took over. And the last 15 or 20 minutes was a typical close to what we've been dealing with almost every day, with the market closing at or near the lowest of the trading session.

BLOCK: Well, Ted, thanks for talking to us throughout this volatile day on Wall Street. We appreciate it.

Mr. WEISBERG: It's my pleasure.

BLOCK: Ted Weisberg, the president of Seaport Securities and a trader on the floor of the New York Stock Exchange for about 40 years.

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Rate Cuts Rattle Markets; Paulson Urges Patience

NPR's Jim Zarroli, Rob Gifford and Steve Inskeep discuss market developments on 'Morning Edition'

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Treasury Secretary Henry Paulson took questions from reporters Wednesday. "We will use all of the tools we've been given to maximum effectiveness," he said. Win McNamee/Getty Images hide caption

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Win McNamee/Getty Images

Treasury Secretary Henry Paulson took questions from reporters Wednesday. "We will use all of the tools we've been given to maximum effectiveness," he said.

Win McNamee/Getty Images

Traders on the floor of the New York Stock Exchange look up at the opening numbers on Wednesday. Timothy A. Clary/AFP/Getty Images hide caption

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Timothy A. Clary/AFP/Getty Images

Traders on the floor of the New York Stock Exchange look up at the opening numbers on Wednesday.

Timothy A. Clary/AFP/Getty Images

Brokers in London react to news of a half-percentage-point rate cut from the Bank of England on Wednesday. Leon Neal/AFP/Getty Images hide caption

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Leon Neal/AFP/Getty Images

Brokers in London react to news of a half-percentage-point rate cut from the Bank of England on Wednesday.

Leon Neal/AFP/Getty Images

Futures trading is setting Wall Street up for a solid start on Thursday.

The Dow Jones industrial average futures index was up 136 points ahead of the opening bell in New York.

South Korea, Hong Kong and Taiwan followed the central banks in cutting interest rates.

European markets rose after Wednesday's coordinated global interest rate cut. Investors in Asia showed enthusiasm over the rate cuts, but markets were tempered by ongoing fears about the credit crunch and a possible recession worldwide.

Seeking to calm investors' jangled nerves Wednesday, Treasury Secretary Henry Paulson said U.S. policymakers stood ready to do whatever was necessary to tackle the worst financial crisis since the Great Depression.

"We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," Paulson told reporters at the Treasury on Wednesday.

He said that the Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. were ready to "use all their authorities to promote the process of repair and recovery and to contain the risks to the financial system that might arise from problems at individual institutions."

Central Banks Coordinate On Rate Cut

His comments came hours after the Federal Reserve and five other central banks announced a coordinated interest rate cut of half a percentage point. Paulson said that the rate cuts, once they worked their way into the financial system, would stabilize the financial sector, and a program the Fed announced earlier this week to buy commercial paper will "significantly improve the availability of funding for financial institutions and corporations that depend on the commercial paper market."

The rate cut was a bid to jump-start the ailing global economy, but what it ended up doing is spooking investors on Wall Street. They clearly didn't know what to think. Was the coordinated cut a sign that central banks were going to do whatever was necessary to prevent a deep global recession? Or was it a harbinger of still darker days ahead?

The markets were all over the place. At one point the Dow Jones industrial index was up as much as 181 points and then fell much as 252 points before closing down 189.01 at 9258.10.

Paulson Asks For Patience

After such a roller-coaster ride, investors were hoping the Treasury would announce an early start to the $700 billion bailout program. Instead, Paulson emerged Wednesday afternoon asking for their patience.

"The turmoil will not end quickly and significant challenges remain ahead," Paulson said as he outlined what the Treasury has done to start implementing the $700 billion financial rescue package Congress passed and the president signed last week. "Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties."

He said the Treasury was busy recruiting asset managers and other staff needed to carry out the rescue plan. But it would take some time to get that set up. It will be weeks before the Treasury will have everything in place to actually start buying the bad mortgages that financial institutions have on their books.

Paulson's comments came just two days before the Group of Seven Industrial Nations meets in Washington. This will be their first meeting since the financial crisis ignited last month. Paulson said that he wanted a special meeting of the finance officials from the Group of 20 as well. The Group of 20 includes both developed and emerging economies.

Since Monday, financial officials have been taking out their biggest guns in a bid to bolster investor confidence. The week began with the Treasury beefing up its team so it could implement the $700 billion package. The next day, the Federal Reserve announced that it would begin to buy commercial paper — the short-term loans that businesses need for their day-to-day operations — so it could inject some money into the frozen credit markets. Then U.S. investors woke up on Wednesday to a coordinated global rate cut.

A Glimmer of Hope?

In spite of all this movement, most eyes were still trained on the credit markets. The cost of borrowing dollars overnight in London has been soaring. The London Interbank Offered Rate, or LIBOR, which is the interest banks charge each other, jumped 144 basis points to 5.38 percent Wednesday, the British Bankers' Association said. That number, however, was set before the global rate cut was announced.

Investors saw a glimmer of hope in the fact that the interest-rate spreads squeaked a little lower. The two-year swap spread fell almost 1 basis point to 133 basis points. On Oct. 2, the swap spread was at 167.25 basis points, according to Bloomberg figures.

The simplest way to explain swap spreads is that they are the premium charged over Treasury yields. That premium is meant to essentially be the costs incurred to cover any risk. Treasuries, of course, are considered the safest investments because they are backed by the U.S. government.

Another key indicator of how the credit markets are doing is something called the "TED spread." That is the difference between what banks and the Treasury pay to borrow money for three months. According to Bloomberg figures, the spread is now at 387 basis points. Earlier Wednesday it had widened to 403 basis points. That's the biggest spread since Bloomberg began compiling data in 1984.

"I am not going to make predictions on the time it will take for the economy to recover," Paulson said. He said he was working to "mitigate" the financial impact the financial crisis would have on the economy.

Paulson warned not to read too much into the narrowing spreads. "It is too early to look for encouraging signs in the credit markets," he said. "It is going to take a while to work through this problem."

Fed Gives AIG New Loan

Meanwhile, soon after the U.S. financial markets closed, the Federal Reserve announced that it had agreed to provide insurance giant American International Group another loan of up to $37.8 billion. Just last month the government said it would lend AIG up to $85 billion in exchange for a nearly 80 percent equity stake in the company. The Fed said Wednesday that AIG needed more. So the Fed will borrow up to $37.8 billion in investment grade, fixed-income securities from AIG in return for cash collateral.

The Fed said the idea is to help AIG boost its liquidity because the company has already drawn down the $85 billion in the original emergency loan. To people following the AIG situation closely, the news isn't so surprising. Last Friday AIG's new CEO, Edward Liddy, told analysts that AIG had already drawn down $61 billion of the emergency bridge loan the Fed provided two weeks ago. The idea behind the loan was to allow AIG time to sell its troubled assets in an orderly way. Liddy said most of the original Fed loan had gone to shore up AIG's hobbled structured-finance unit and its securities-lending business.