Financial Markets: 3 Predictions | Dare Mighty Things

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I may be wrong, BUT…

(Update 4/1/2009 – Wow, was I wrong or what! I’ve learned a lot.)

1. This is the End of the Financial Crisis–

This is the end, not the beginning, not the middle. AIG will likely get a $85B-$90B bridge loan from the Fed backed by company assets in exchange for a majority stake in the company. The Dow will continue its rise in the morning with the news of AIGs stabilization. Based on March market capitalization, AIG It is five times bigger than Lehman. AIG is the 13th largest company in the world according to the Fortune 500 versus 37 for Lehman. It is an insurance and annuities company mainly and not a broker. It affects Main St. Americans much more than Lehman did. It can’t, and won’t be liquidated.

2. Oil Is At a Bottom–

Oil is at its bottom. Remember $88.90 per barrel, the bottom today before it started rising at 2:30pm. It is the lowest we will see a barrel of oil sell for in the next fifteen years until sustainable energy technology (“ET” as Friedman calls it, “ST” as Sachs calls it) creates green power at a price/KWH that is lower than fossil fuels can and transportation fully converts to electric ( reducing global demand for oil significantly and possibly reducing the price under today’s price). Oil will trend upwards, more slowly, toward $150/barrel by the end of the decade.

3. The Dow and S&P Have Reached Their Bottom–

The DJIA has reached it’s bottom. Remember 10,742.70, the bottom today at market open. It’s the lowest you’ll see the DJIA go in your lifetime. The underlying profits and productivity of American businesses are simply too strong to justify the S&P 500 the same level it was at in December 1998, nearly ten years ago when the U.S. GDP was 58% lower than it is today (8.7T vs. 13.8T).

This graph shows the S&P 500 at the same place it was in December 1998. Today’s bottom was 1174.

I may be wrong here, BUT… I sure hope I’m not.

The Influence of Hank Greenberg on the Fed

As an aside, Hank Greenberg, a WWII hero and the former CEO of AIG for 37 years, has had quite a bit of influence on the Fed policy vis-a-vis AIG it seems. I heard him on Bloomberg radio today sounding like Mikheil Saakashvili on CNN five weeks ago when Russia was “invading” Tskhinvali. Greenberg wrote earlier today in the Financial Times:

“AIG is not an ordinary company. It has opened markets all over the world and, for more than three decades, stood at the vanguard of the liberalisation of the global trade in services. Its stock is owned directly or indirectly by millions of Americans. And it has contributed significantly to US gross domestic product directly and indirectly over the four decades of its existence. But all that is not why it should be saved. AIG has a trillion dollars in assets. It can (and always has) serviced its debt. With the right leadership, it will continue to do so. Action is needed now: AIG needs immediate help, because the threat to our financial system is real. For that reason, if private capital cannot rescue AIG, a temporary federal bridge loan – not a federal bail-out – is in order.”

A Place of Ideas: Renaissance Weekend Day One

I’m in Aspen, Colorado for an inspiring gathering over Labor Day Weekend. It’s Friday night at 10pm and the dance floor is calling–but I am driven to write first and dance later.

The gathering is called Renaissance Weekend, started by Ambassador Phillip Lader and Linda Lader in 1981. I first heard of the Weekend on my way to the Orlando airport in 2006 while serendipitiously sharing a taxi with former U.S. Congressman Martin Lancaster, the current President of the NC Community College System.

We were on our way back from the National Association of Community College Entrepreneurship (NACCE) conference. He told me how the weekend gatherings, originally in Charleston, SC over New Year’s and now in Aspen, Tuscon, and Monterey, brought together driven and accomplished people to discuss public policy, science, business, religion, and more.

I took a look at the site and saw past participants included Bill and Hillary Clinton, Alan Greenspan, Gerald Ford, Evan Bayh, Howard Dean, Bill Richardson, Janet Napolitano, Lawrence Summers, Ted Turner, Steve Case, Steve Jurvetson, Steven Colbert, and North Carolinians Terry Sanford and John Sall.

I wanted to go, but had no way in.

I heard nothing more of this gathering for two years, until this June when my friend Stever Robbins gave me a call. He nominated me to attend and wonderfully I’m now here.

Today was the first full day of Renaissance. I must say from the first day that it has been a wonderful experience so far. One of the ways the Weekends are different than any other conference is that every attendee is assigned to present briefly (for 2 minutes to everyone and then for about 10 minutes in numerous breakout panels) on either what they know most about or what they are most passionate about. This practice enables attendees to hear from experts in their field ranging from astronauts to cosmologists to entrepreneurs to neurosurgeons. At this Weekend, there are about 300 attendees.

Today I was assigned to present for 2 minutes to the group on “An Immodest Proposal – If I Could: Serious and humorous proposals on policy, work, religion, and marriage.” I then participated on a panel with six others called “Why Not Change the World? Examples and Visions of Social Entrepreneurship & Community Service.”

At noon, I experienced the most intellectually stimulating hour of my life since the panel on global peace at Fortune Brainstorm with Jeff Bezos last month. My friend and venture capitalist Nick Beim from Matrix Partners moderated a panel called “Putin’s Czarist Plan: Is His Russion a Neo-KGB State” that I hope to post about next.

Tomorrow, Saturday morning, I’m presenting for 2 minutes at 9am on “When I’m 65 – A Red Bull Generation Envisions Their Professional, Personal, & Nation’s Future,” taking the afternoon off to go white water rafting for the first time in my life on the Colorado River, then returning for a 6pm discussion, “Must There Always Be a Bottom Billion: Promise & Pitfalls of Reducing Poverty, Supporting Social Entrepreneurs, and Assisting the World’s Less Developed Nations.”

As a short aside I’ll share a fun story. This visit is my first time in Aspen and the Aspen Institute since July 2006 for Fortune Brainstorm 2006. I recall then sitting next to John McCain for 10 minutes while watching the Germany-Italy World Cup game in the lobby of Aspen Meadows and then seeing him go to the back of the lounge to speak with Vinod Khosla, ostensibly about alternative energy. Thinking she was a passerby and not knowing then who she was, I asked Cindy McCain to take a picture of Senator McCain and I. She somewhat unwillingly oblidged, but alas, the camara battery was dead and no proof exists.

This is a place of ideas and action–action that leads to making a difference in the world. I’m fortunate to be here and look forward to sharing tomorrow night how the day goes.

From their site:

“With equally distinguished participants, all Renaissance Weekends foster lively exchanges which transcend ideological, political, economic and religious differences. This eclectic, non-partisan group – CEOs, venture capitalists and entrepreneurs, Nobel Laureates and Pulitzer Prize-winning authors, artists and scientists, admirals, astronauts and Olympic athletes, judges and journalists, volunteers, diplomats and work-at-home parents, Presidents, Prime Ministers, professors and priests, Republicans, Democrats and lots of Independents, innovators from across America and several nations – has become for many an extended family.”

The dance floor is calling my name…