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Data Centers Crucial To Lehman Sale
miller60 writes "What assets retain value in the midst of a financial panic? Data centers. When assets of bankrupt Lehman Brothers were sold to Barclays Tuesday for $1.75 billion, Lehman's data centers and headquarters accounted for $1.5 billion of the value in the deal. That echoes the JPMorgan-Bear Stearns fire sale, in which Bear's two data centers and HQ represented much of the sale price. Amidst financial turmoil, Wall Street's high-tech data centers become the crown jewels for buyers of distressed assets."
No. it's all about avoiding the expense of building one yourself. The actual data in those centers may or may not be worthwhile to the buying organisation, but the floor space and ready-to-roll IT structure most certainly is.
Posted anon since I was involved in one of these things recently.
Depends on what caused the panic. I wouldn't be surprised if the book value on many skyscrapers dropped significantly about 7 years ago.
I deal with a lot of distressed older commercial debt, so I see a lot of the backlog. There are a handful of banks, certainly, that have it right, but there are plenty out there which can't afford the expense of updating to modern data retention, or at least taking care of what is already on paper. There's a ton of paper out there in places like Iron Mountain and such which does nothing but store paper because the bank can't afford to digitize the stuff. You're partly right, at least for the bank you did work with, but I see tons of other material as well that never makes it that far.
Yeah, 'cept now the idiots are bitching and moaning in an election year, so the people who really get stuck holding the bill are the people who know how to spend their money responsibly. The idiots who bought houses they couldn't afford are whining and getting help from the government, and you know the overcompensated execs at these companies are sure to get their golden parachute, even if it comes courtesy of uncle sam. Kind of funny, weren't these the same people who were whining about how high taxes were not too long ago?
Monstar L
Tell that to the Japanese, where skyscrapers have fallen in value by a good 50%. When your mortage is worth more than the building this is not an asset.
As the data which is stored on those servers. Don't you think the financial data for tens of thousands of customers is worth something? Also, physical facilities, HVAC, network infrastructure, etc. Also, a lot of the value of a data center, I suppose (I'm no expert in this field) might be less about the hardware itself, as the engineering that went into building up the data center as a cohesive, integrated system.
The problem really started with you. And here's how. You elected the government, which adopted legislation, which enabled the lenders to give loans to unreliable borrowers, who would buy hugely overpriced houses they could not afford, that would go down in value because they were never worth their price in the first place, sending real estate business down the drain, closely followed by construction, mortgage, and insurance industries, that form the core of the country's financial system, which is controlled and guaranteed by the government, which borrowed trillions from EU, Japan, China and Russia to fight wars abroad for no particular reason, which dropped the value of the dollar, which caused energy prices to skyrocket, which accelerated our country's economic recession, which made it necessary for the government to spend more of your money to prop up this whole pyramid scheme we call the "free market". And how did all of this start? With too many of us voting for the idiot who couldn't spell "economy", let alone understand it.
First of all, these are unprecedented times in global financial markets. Once in 100 years is putting it mildly.
Second, a data center and a building are the only assets that can be valued with the shotgun marriages the Administration, Treasury, and Fed are making right **now.** By now, I mean no sleep, no one leaves until the deal is closed NOW.
BofA got a sweetheart deal with Countrywide, they are getting another sweetheart deal with whatever brokerage they acquire. The same holds true of JPMorgan Chase and Co.
The Fed has literally run out of money with the AIG nationalization and has asked the treasury to print more dollars NOW. http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html
Once again, the losses are being socialized while the titans of financial executive management just walk away.
You would be wise to re-balance your asset pool to reflect coming inflation. And any pension holders out there should do your best to liquidate your pension today, that is, if your pension isn't underfunded already or if that is even possible.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
y = (1 + x)^N
It's the function which describes the growth of a debt due to interest.
Here's the function which describes the growth in the money created at exactly the same moment, when the loan is taken out.
y = x
You notice one is exponential, the other isn't in fact growing at all.
That is the Fractional Reserve Banking based monetary system. I'll let you work out the implications.
Deleted
I somewhat doubt Lehman is making a profit on their data centers, either. What they are doing is liquidating the assets that have value.
As amusing as it is, that's exactly why AIG is in trouble. Each tier saw the risk coming and tried to pass the risk upstream. The problem is that the risk was not isolated. With all these upstream pushes, the risk ended up concentrated in the largest companies in the market. It's no coincidence that AIG is one of the largest insurance underwriters in the world.
Javascript + Nintendo DSi = DSiCade
Indeed. It's one of the few sectors where rapidly rising oil costs and plummeting property values has little effect. As a result, the sector is one of the strongest in the market today. And not just because people must have the latest and greatest software and gadgetry. (Consumers actually have less money for that.) Instead, technology is seen as a possible solution to the problems plaguing other industries.
Real world example: UPS developed software to route their trucks through fewer left turns. This rerouting reduces fuel costs and thus produces tremendous savings for the company.
Javascript + Nintendo DSi = DSiCade
Here's the real problem. Everything the banks have lent money to people to buy are kinda valueless because they are obsolete. Technology keeps advancing such that there is no such thing as collateral any more and thus all the banks are worthless...
I was under the impression that houses were the main cause of the problem- and with the possible exception of some ludicrously techie piles built by multi-billionaires, they aren't really "tech" items and they certainly don't go obsolete within four or five years.
Even though cars (which I'd guess are probably second in terms of loan-spending) only last a few years, it's generally not because the tech goes obsolete, it's because they wear out and/or fall apart. (I'm sure that my parents first car (built in the late 1970s) would still be going today with some engine adjustments for unleaded petrol, except that its rusting to pieces by 1986 precludes this possibility!)
Granted, I'm sure that people take out more (and less justifiable) loans to spend on tech crap than they should- along with home decorating and expensive holidays- but I doubt it's the driving force behind the current economic mess. In fact, moderately cutting-edge tech is *dirt cheap* compared to what it used to be twenty- and even in some areas ten- years ago. People can fill their new homes with techie crap which will generally still be worth a small fraction of what they paid for the house itself. Yeah, the house will last longer and can be considered an "investment" in the way that electronics technology almost never can. But the value and losses involved when that "investment" goes wrong dwarfs the cost of most peoples' boxes of flashy boys' toys.
"Slashdot - News and Chat Sites Deviant". (Click "homepage" link above for details).
I agree with your general point:
they were misled. ... dumb people do not DESERVE to be taken advantage of by smart people.
But I still should point out that:
-Any taken-advantage-of borrower requires an even-more-taken-advantage-of lender. The borrower gets to walk away, at least having a gained some time in a home they shouldn't have moved into, while the lender suffers a huge loss. (Of course what actually happened here was the immediate lender, a broker, pocketed a huge gain and dumped it on other investors.)
-The problems were by and large not with the fine print. They were problems like, "I didn't know that adjustable rate mortgages adjust" and "I can't actually afford the monthly payments".
Btw, I think a large part of the problem could have been avoided with a very light regulation: label as "dangerous" any mortgage other than a fixed rate, 20% down, 30-year, fully-amortizing, non-recourse, no-prepayment penalty. Then, require it to be authorize by a rubber-stamp government agency that approves everything it gets, but after taking three weeks to get back to you. That adds a huge psychological barrier to non-savvy buyers, effectively steering them away from unsafe mortgages, while not making much of a difference to people who know what they're doing.
Information theory is life. The rest is just the KL divergence.
From TFA:
Throw that in and you have $1.5 billion, no problem.
Javascript + Nintendo DSi = DSiCade
Sorry, wrong building. This is the one in the deal.
Javascript + Nintendo DSi = DSiCade
Take the infamous NINJA loan: No Income, No Job, No Assets. That is, you're given a mortgage based on nothing but good looks and your credit score. Nothing else is verified
Thanks to these NINJA Loans this month it will be 5 years since I live in my own house. I may have never gotten out of renting without them since I wasn't good with money, my credit score sucked and had no assets besides my computers and car (following George Carlin's leadership, the rest of my paychecks went to pussy and beer)
The best call I made was buying the cheapest decent house ($124k) I could afford so my mortgage ended up just $100 more than what I was paying for rent. The builder told me I could qualify for a big ol' house twice that amount but I resisted. I am glad I did, I have been able to comfortably pay all my bills even on rainy days.
HTML is obsolete. It's time for a new, simpler and richer markup language.
Little OT but I found puzzling to say the least this Zeitgeist documentary (google it) claiming there was no way these towers would collapse like they did. It says they central pillars where strong enough they should stayed up when the towers pancaked. They even show pictures of pillar remains with diagonal cuts and claim that traces of explosives were found that are normally used in professional demolitions.
</TinfoilHat>
For people who are still struggling to understand what's going on with the whole financial crisis, here's a great primer I was directed to: Subprime Primer.
It's a very simplified explanation of what's happened. From what I understand, it all comes down to everyone believing that real-estate value wouldn't stop rising.
This space up for sale.
That's certainly true. The only caveat I'd add would be that much of the problem isn't just "life" (in the proverbial sense).
In many cases today the problem is black and white fraud.
Yes, the borrower is at fault for taking more than they can afford.
But our system has functioned properly since the New Deal by bringing accountability to those in the financial sector.
Deregulation of the industry and a bevy of new financial instruments that are very difficult for individual regulators to fully understand and audit has eliminated this accountability.
Honestly, we need to see mortgage brokers going to JAIL. We need to see appraisers going to JAIL. We need to see MILLIONS in personal property of CEOs and CFOs and such confiscated as restitution.
Oh yes...there were others too; I just skimmed over the highlights. The biggest highlight of all is the fact that Alan Greenspan favors total deregulation of the financial sector.
The same deregulation failure that has hit the Electric Industry in PA, where we are facing up to 60% cost increases in 2 years after the 'caps' come off. Caps that were put in place for 'deregulation' to occur and save the consumers. Deregulation to 'encourage' competition--that has led to the loss of 22 power companies in PA.
The same deregulation that led to a telecommunication industry that has ultimately become 4 major companies, and a slew of smaller companies. The same industry where my landline costs were double my cell phone costs.
In America today you can murder land for private profit. You can leave the corpse for all to see, and nobody calls the c