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September 16, 2008
SouthAmerica: As AIG and WaMu are also sucked into the black hole in the coming days and join Lehman Brothers, and Bear Stearns - the meltdown in US financial markets will continue as the contagion spreads throughout the US financial system.
The meltdown on the derivatives market is under way and that is the trigger for a financial system meltdown similar to what buying stock on margin helped implode the stock market during the market crash of 1929.
This time around the culprit will be the derivatives market and the mind-boggling usage of leverage bordering a complete lack of even a minimum of common sense.
Now that thousands and thousands of people are going to lose their highly paid jobs in Wall Street and thousands of these people just became ex-millionaires since their stock options, and investment of the stock of their firms have evaporated overnight â many of these people are going to have problems paying their mortgages increasing the number of foreclosures in the high end side of the real estate market.
Basically the entire system is spinning out of control and is imploding very fast.
I listed a few stocks below and in just these 6 stocks $ 500 billion in wealth has evaporated from the US financial system in a very short period of time.
Never mind the loss in wealth that is going on around the United States in the real estate market.
In no time over 20 percent of all mortgage holders will be under water and many of these people will walk away from their personal financial mess creating even more massive losses to be absorbed by the financial system.
If this was an American Football game we still are in the first quarter and the game is already getting out of hand.
If the Federal Reserve gives a cut in Fed Funds rate today that would mean nothing to this fast imploding financial system.
The wealth effect on the US economy will work in reverse and Americans are going to feel poor by the day. The carnage still underway and will have a very negative effect on most peoples Pension funds, Mutual Funds, and so onâ¦Until the entire mess unwind on all these markets it will take a long period of time for the dust to settle and people realize the devastation that happened to the entire US economic system.
The entire US financial system is in damage control and only fools would invest their money right now in such unstable financial environment. The fools who decide to invest their money right now deserve to lose it all because they are just a bunch of suckers.
You canât stop this massive financial implosion process with a few band-aids and public relation spins. The system is already spinning out of control with all kinds of things (including the derivatives market) that have been placed in motion with the nationalization of Fannie and Freddie and the collapse of companies such as Lehman Brothers, AIG, and WaMu among others that will create even more downward pressure to the entire US financial system.
If some experts try to convince you that the US financial authorities are aware of the impact to the US economy of all the financial problems that are spinning out of control and that the Fed and the Treasury have everything under control - Al I can say is that that person is full of bullshit and nothing else. At this point nobody really knows or understands the full extent and magnitude of the financial meltdown that is underway.
The one positive thing to keep in mind is that the world still is full of suckers, naïve people, and very greedy people who are willing to jump in and hope for the best.
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Bear Stearns market cap went from $25 billion to a fire sale to JPMorgan Chase for a mere $240 million.
Merrill Lynch Market Cap was $76 Billion (Merrill Lynch 2005 Annual Report)
In September 2008 Merrill Lynch Market Cap $25 Billion.
Citi's market cap was $290 billion at the end of 2006. In September 2008 Citiâs Market Cap reached a low of $76 Billion.
Lehman Brothers Market Cap a little over 1-year ago was US$ 29 billion dollars and on September 15, 2008 Lehman Brothers Market Cap reached a low of US$ 117 million dollars
AIG's market cap is down to $13 billion, down from $129.2 billion at the start of the year.
Washington Mutual's market cap has dropped from $55 billion to $3 billion in less than a year.
Just on the above companies the loss in market cap has been devastating as follows:
Bear Stearns = $ 25 billion dollars
Merrill Lynch = $ 51 billion dollars
Citi = $ 214 billion dollars
Lehman Brothers = $ 29 billion dollars
AIG = $ 129 billion dollars
WaMu = $ 52 billion dollars
Total = $ 500 billion dollars
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September 15, 2008
AIG (AIG): A Bridge Loan To Nowhere
AIG (AIG) managed to lose 60% of its market value today. At one point the stock was off 70%. A partial rescue came in the form of permission from New York State for the huge insurance company to loan money from its operating units to the parent company. This could provide as much as $20 billion.
â¦AIG's market cap is down to $13 billion.
â¦AIG is trying to raise $70 billion to $80 billion in bridge financing with the promise that the money will be repaid as the company sells its auto insurance, annuity, and aircraft leasing businesses.
â¦Warren Buffett had a look at a deal to "save" AIG. He passed. So did a lot of other smart money that got a shot at an AIG financing over the weekend.
AIG is now pursuing the greater fools. But, they are running low on capital themselves which leaves AIG at the edge of liquidation.
Source:
http://www.247wallst.com/2008/09/aig-aig-a-bridg.html
Note: AIG's market cap is down to $13 billion, down from $129.2 billion at the start of the year.
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The $639B Bankruptcy
Wall Street emerged from the weekend in crisis mode and with a completely reshaped financial sector. At the forefront of the crisis is Lehman Brothers (LEH), which after 158 years in business filed for Chapter 11 bankruptcy protection as it becomes the latest victim of the credit crisis.
Valued at $639 billion, Lehman's is the largest bankruptcy filing in U.S. history -- easily surpassing the collapses of Enron and WorldCom combined.
â¦Merrill Lynch
Seeking to avoid Lehman's fate, iconic brokerage house Merrill Lynch (MER) agreed to sell itself to Bank of America (BAC) for $29 per share in an all-stock transaction that shocked Wall Street.
The deal, which is subject to shareholder and regulatory approval, presently values Merrill at $50 billion. Shares of Merrill soared during intraday trading but closed flat and off by $12 from the offer price.
Merrill has also been slammed by bad bets in the housing market, posting $40 billion in write-downs and credit losses over the past year. The selling price represents a 70% premium from Merrill's close on Friday, though the company's shares plummeted 36% last week to its lowest level in nearly 12 years.
Source:
http://www.foxbusiness.com/story/markets/futures-plummet-lehman-bankruptcy-merrill-purchase/
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