Thomas De Maesschalck’s blog

Rumour has it that Fox is going to terminate The Sarah Connor Chronicles because of high costs and lack of viewers. First Firefly and now this great show is getting the axe? What a shame. If the rumor is true I hope they’ll at least air the rest of the second season.

The year 2008 is slowly coming to an end, just three more months to go! The fourth quarter is usually the best in terms of ad dollars for most sites and I hope revenue will start picking up soon.

Earlier today I’ve compiled the numbers of the revenue my business generated in September and it’s not looking too good. Last month’s income was about 5 percent lower than September 2007 – that doesn’t look that bad but unfortunately a relatively large chunk of the September income were one-time deals. Without these extras the revenue would have been 35 percent lower than a year ago.

The amount of traffic I receive is still pretty much the same as a year ago, it seems the advertising money is drying up due to the slowing global economy. Especially Google AdSense and Chitika are generating a lot less money than a year ago.

Last week was pretty crazy but it has become even worse. The Bel20 (a Belgian index) lost 7.98% today while the Dow Jones plunged 700 points (-6.98%) which is its biggest-ever point drop. The Nasdaq crashed 9.14% today and the stocks of most firms are down hugely. The S&P500 dropped 8.79% – it’s biggest loss since October 1987.

Here’s a quick overview of some tech firms: Intel -10.16%, NVIDIA -13.77%, AMD -16.86%, Apple -17.42%, Google -10.68%, Microsoft -8.39%. What a bloodbath! According to Google Finance the biggest losses today were in the energy, basic material and financial sectors. The stock markets opened in the red due to the problems in the financial sector in Europe and the US and things got a lot worse when the Paulson plan got rejected.

Hypo Real Estate, Bradford & Bingley, Glitnir and Wachovia got saved and I was also surprised by what happened here in Belgium. In the past couple of days the credit crisis made two victims in my country. Authorities feared for a run on the bank and worked out a plan this weekend to restore the public’s faith in Fortis, the largest bank and insurance group in Belgium. Last week there were a lot of rumours regarding the health of this bank, Fortis denied it and said they were in good shape but it turned out it was just another lie.. Anyway, due to a a long list of circumstances the market had completely lost its faith in Fortis and as this group is vital to Belgian’s economy the government didn’t dare to make a gamble on this one and announced Friday night that a deal would be worked out before Monday.

After two days of negotiations a deal was made. The bank will receive an injection of 11.2 billion EUR by the Belgian, Dutch and Luxembourg governments in return for a 49% participation of Fortis’ bank divisions in each of the three countries and Fortis decided they will sell the ABN AMRO activities they acquired last year – but likely with a loss of more than 10 billion EUR. To make a long story short: the acquisition of ABN AMRO was one of the reasons why Fortis got in so much trouble, they paid a lot more for a piece of this Dutch bank than it was worth. After that the credit crisis turned the financial markets upside down and it became hard for Fortis to raise enough cash for their expensive takeover. A lot of bad news and rumours followed and shareholders lost a lot of money but fortunately savers can now be certain that their money is 100% safe. I’m not really a big fan of government interventions but I think this is the best that could be done in such a brief timespan. The only other alternative seemed to be a sale to BNP Paribas and they wanted to give only 1.6EUR per share (Fortis closed at 5.20EUR on Friday) and demanded lots of guarantees from the Belgian government as well.

I was also surprised today when the government announced they’re working on a bailout of Dexia, the second largest Belgian bank.  Until today the bank denied all rumours that they would need to raise new capital but then, almost out of the blue, an announcement came that Dexia is in need of 7 billion EUR. A deal is in the works and according to the financial press the 7 billion EUR will likely come from the Belgian federal government, regional governments, Dexia’s largest shareholders and perhaps even France and/or Luxembourg.

A bit more positive is that oil dropped 10 percent today but the overall market looks very bloody. I wonder if the night is darkest just before the dawn or is the worst yet to come?

If you’ve been following the economic news you’ve probably noticed the past couple of weeks have been very crazy. Here’s a quick overview of some of the more significant events that happened lately:

September 7, 2008
A bit more than a week ago the US government nationalized Fannie Mae and Freddie Mac, the two biggest mortgage companies in the US. The Treasury shelved out $200 billion to keep Fannie and Freddie solvent. Freddie and Fannie hold or guarantee over $5 trillion in mortgages – which is nearly half of all of the US’ outstanding home loan debt.

September 15, 2008
Investment bank Lehman Brothers goes belly up, files for Chapter 11. There were some parties interested in acquiring Lehman, such as Barclays and Bank of America, but they stepped away as the Fed refused to intervene like it did with Bear Stearns in March. Lehman’s debt was $613 billion against total assets of $639 billion. Apparently, Lehman was not too big to fail. The previous largest bankruptcy was WorldCom in July 2002, they had $107 billion worth of assets.

A day earlier Merrill Lynch sold itself to Bank of America for $38.25 billion in stock. Only two independent Wall Street investment banks remain: Goldman Sachs and Morgan Stanley.

September 16, 2008
Insurance giant AIG is in trouble. The collapse of this firm would be a disaster for the financial system so the Fed bails out the private firm by giving them a loan of up to $85 billion in exchange for an equity stake of almost 80% in AIG. This was the largest government bailout of a private company in US history.

September 17, 2008
In the last couple of months gold had fallen back from a bit more than $1,000 per ounce to the $700s but on Wednesday scared investors pushed the precious metal up by more than 11% from $780 to $837. This was the biggest 1-day gain ever for gold. Meanwhile, the Dow drops 450 points to its lowest level in almost 3 years and Nasdaq posts its first triple-digit loss since the September 11 attacks.

September 18, 2008
The SEC bans naked short selling. Shorting a stock means you borrow a stock with the aim of selling it and buying it back at a lower price – you gain money if a stock drops and lose money if a stock rises. Naked shorting means you’re shorting a stock without borrowing it, some experts (partly) blame this financial instrument for the large drop of some stocks.

The British FSA bans shorting of 29 financial firms until January 16, 2009.

British financial institution Lloyds TSB takes over troubled banking and insurance group HBOS for £12.2 billion (around $21.85 billion).

Central banks pump $180 billion into the money markets.

Morgan Stanley needs more capital and is in talks with suitors, China Investment Corp (CIC) might acquire a 49% stake in Morgan Stanley but it’s also possible that the investment bank will be acquired by Wachovia.

Washington Mutual, the largest savings and loan association in the US, is also a takeover target. It’s rumoured that Citigroup, Bank of America, JPMorgan Chase and Wells Fargo are interested in WaMu.

The American indexes make a spectacular recovery after Henry Paulson, United States Secretary of the Treasury, proposes to create a new “bad bank”. The Dow Jones jumps 3.9 percent higher and stocks of financial institutions skyrocket.

The bad bank would be a huge bailout plan for the banks, it would be somewhat similar to the Resolution Trust Corporation plan which helped to clean the banks of junk debt in the late 1980s and early 1990s (Savings and Loan crisis). This bailout plan would be designed to remove illiquid junk from the balance sheets of financial institutions and will hopefully solve the crisis and restore confidence in the banking system. This would be one of the largest interventions in the financial markets since the 1930s. The costs involved with the bailout of the banks will be massive, it’s suggested it will be at least $500 billion but some sources believe it’s closer to $1.2 trillion. Bad news for the US tax payer but the alternative could have been worse. Without a bailout the financial system might get disrupted a lot harder, credit to families and businesses could dry up almost completely and the economy would take an even larger hit. The bailout could be seen as a huge investment into the economy, the US government will receive the ‘toxic junk’ from the banks but if everything goes well these assets could be worth a lot more within a couple of years. I’ve heard Sweden did something similar with a bad bank in the 1990s and their bailout turned out to be profitable.

September 19, 2008
SEC outlaws shorting of 799 financial stocks until at least October 2nd. Other countries, including Belgium, are preparing similar actions in an attempt to calm down the markets.

Another big rally for many European and American stock indexes. Big gains for the financials.

Some new updates (added September 22, 2008):

September 21, 2008
The bank bailout is expected to cost $700 billion. That’s several hundreds of billions more than the GDP of a small country like Belgium.

September 22, 2008
The final two Wall Street investment banks announce big changes to their business model and will become “normal banks”. Shaking off their investment bank profile will make it easier for Goldman Sachs and Morgan Stanley to raise new capital and will enable them to get loans directly from the Fed.

Dollar drops while oil has a massive gain. Crude futures topped $130 today, a $25 gain, but slipped back to $120 afterwards.

On Saturday we went to Brussels to the Cellars of Cureghem to see Körperwelten 4, a traveling exhibition of preserved human bodies and body parts. Körperwelten is German for “Body Worlds” and it’s the child of German anatomist Gunther von Hagens, the inventor of a technique for preserving biological tissue specimens called plastination.

The exhibition features more than 200 human specimens, there are quite a lot of full body plastinates and even an entire body that was sliced and displayed spread-out so you can closely examine what a human is made of. Everything you see at the exhibition comes from real people who, according to von Hagens, willingly donated their bodies for plastination via a body donation programme. Here’s the description of the show:

In KÖRPERWELTEN 4, the exquisite form and physiology of the human body is illuminated by more than 200 new authentic human specimens that show the latest advances in plastination and dissection technology. The exhibit features original plastinates, never before seen in Brussels, including individual organs, transparent body slices, and whole bodies, transformed through the revolutionary preservation process.. See the body in disease, distress, and optimal health by comparing smokers and non-smokers lungs, healthy and cirrhosis liver, dysfunctional and robust hearts, optimal and over weight bodies.

It may sound a bit disgusting or lugubrious but Körperwelten is quite interesting as it gives regular people the opportunity to see what’s inside their body and it allows you to see the effects of diseases or bad habits, such as smoking, with your own eyes. The location of the show is also a pro IMO, the Cellars of Cureghem is a nice underground cellar dating from the late 19th century, which is decorated by hundreds of pillars and vaults.

Some people are concerned Körperwelten might be too gory for them but I didn’t have that feeling, the bodies and organs didn’t look gross at all and they did not have a weird odour. It’s a combination of art and science – we’ve all seen pictures and drawings of our internals in textbooks at school but to see real, plastinated, organs and bodies right in front of your eyes is a whole different and fascinating experience. The show also featured the plastinated body of a western lowland gorilla, it was pretty amazing to see how large the organs of the gorilla are in comparison to the human body.

If you’re interested in learning more about the human body I strongly suggest you visit Body Worlds if you get the opportunity to do so. You’re not allowed to take photos of the exhibition but you can find some interesting shots at their website.