It's the End of the World as we know it, and I feel fine

Those of you who have access to financial news are probably wondering what the nationalization of AIG, the bankruptcy of Lehman Brothers, the acquisition of Merrill Lynch by Bank of America, and a thousand point drop in the Dow, all in the space of three days, mean for us. Here is my view on that, after our daily 9:00 officers' call, in which Scott Galloway of HFF updated us on the status of the financial markets.

Scott said that for the last couple of days there has been an absolute flight to safety and away from risk to the point where short-term Treasuries are trading at no yield. This means people were buying Treasuries just because they felt certain they would get their capital back at maturity. This is very unusual to say the least.

He also said that with best-in-class sponsorship and conservative underwriting, 50-60% LTV debt is available for commercial real estate, probably on terms that are more painful than borrowers would like. The key to accessing debt capital today is to make sure we are being completely open and frank with our lending relationships because people are very chary about risks they can't identify and understand.

None of us old timers has ever seen a market quite like this, but all of us old timers have seen markets before that we said at the time we'd never seen the likes of- 20% interest rates in the late '70s, 20% drop in the stock market in 1987, the capital crunch in real estate in the late '80s, and the Russian ruble crisis in '98- and in every one of them, people who kept their heads about them, who understood their immediate market environment, and who were careful about the risks they took and how they underwrote them, did fine.

Which leads me to what Glenn has been saying for some time now, and it is more true today than ever- Lionstone's strategies were designed specifically to weather these very sorts of storms in the financial marketplace and come out in good shape.

That's why, although it may be the end of the capital markets world as we know it, we'll be well positioned for whatever takes its place. So I, for one, feel fine.