Great…looks like the powers that be at Goldman Sachs aren’t feeling too rosy about the enterprise software sector.

“macro indicators suggest a softening in capital spending in 2008, particularly in the U.S.”

Good times…

Maybe I am a glutton for punishment (or absent financial acumen) but have seen the volatile price as a buying opportunity although it is definitely in the speculative part of the portfolio.  I’ll assume I am in good company with money bags Joseph Lewis taking a big stake and a nice pop today with the Fed cut (closing at 119.2 & up in after hours trading).  Lehman reported today and came out better than expected.  Bear reports on Thursday.  Regardless of what folks say about the firm, Jimmy Cayne, and their hedge fund debacle, I still believe Bear is a well run shop.  We’ll see here shortly if I am off base or not.

Looks like UK-based bank Northern Rock experienced a good ole fashion run on the bank today as people sought to withdraw their savings.  Here is the full story from The Guardian. 

This combined with the fact that Stanford is going to offer a class on Facebook applications (I desperately hope it is a joke) gives me serious pause.

I am a spectator of Wall Street happenings maybe due to the brief stint in corporate finance as an MBA intern, selling software to these firms, or just the sheer amount of entertaining, exciting, and sometimes terrifying news that comes out of capital markets.  I won’t rehash all the ills and spills related to sub-prime mortgages, CDOs, leveraged positions, poor oversight, Bear Stearns, Goldman’s Alpha and North American Equity Opportunities funds, or even today’s BNP revelations, but do have a rather simple question about the purpose of a "hedge fund."  From our friends at Wikipedia, I submit the following:

"They often hedge their investments against adverse moves in equity and other markets, because a common objective is to generate returns that are not closely correlated to those of the broader financial markets.
"

Hmmm…adverse moves?  Like we have been having?

As I understand it, what you get for your 2-3% management fee plus giving up 20% of your profits is a flexible investment vehicle (with light regulation) that can invest across a variety of asset classes both long and short all the while HEDGING against risk and the possibility of big losses.  It seems to me that a true hedge fund (or one worth that kind of fee structure) would have been prepared for the recent happenings and come out on top.  Here’s one such fund that bet correctly on the subprime mess and is up 240% – Hayman Capital Partners.  Managing Partner Kyle Bass’ recent letter to investors is an interesting and scary read.

Paul Kedrosky posted on this amazing document and it is covered on the Wall Street Journal’s Washington wire blog.  This is the transcript from the 9/13/2001 FOMC – two short days after 9/11.  If you ever wanted to understand what happens when the Federal Reserve folks get together, read this.  It not only frames the discussion in a significant historical event but provides a fascinating view of what really mattered at that point in time – from being able to place phone calls to getting the major trading exchanges back up and running.  This statement about long-term capital investment decisions got my attention:

The shock event of this past week is clearly a negative one. It is negative in the most important sense that it presumably increases the real risk premium for long-term capital investment, for fairly obvious reasons. That is, the longer-term environment for which capital investment decisions currently are being made must be perceived to be less certain and potentially of considerably more concern than one would have felt earlier.

Also, as Paul points out, Greenspan’s scenario of a more stable Middle East as a remote consequence did not pan out.  One thing that I thought was particularly omniscient is the following quote:

There is a shock; the shock wears off; there is a period of mild euphoria as the shock wears off; and then there’s a secondary negative effect. With this extraordinary outpouring of activity favorable to the United States position, we may well be looking at part of the euphoria phase.