Wall Street Crashing?

#1
Whichever way this plays out, over the coming days - some of the biggest names in investment banking and insurance are watching their sub-prime liabilities, come home to roost.

In the last months of the Bush administration, what state the economy for the incoming administration? As the Fed now considers the counterparty maze, in order to work out, where all of this money isn't - what impact is Wall's Street's current headlines, about to wreak on the City of London?

In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, said it would seek bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.

But even as the fates of Lehman and Merrill hung in the balance, another crisis loomed as the insurance giant American International Group appeared to teeter. Staggered by losses stemming from the credit crisis, A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.

The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.
New York Times: After Frantic Day, Wall St. Banks Falter

Remember, the value of your investment, can plummet, as well as fall.
 
#2
And they still don't think we've seen the worst. Paulson reckons another big player will fail... its all damage limitation now.

Reform of Bankers pay seems to be the biggest area for change so that this mess don't show up again in the future. The real question is will the lessons be learned? Probably not i reckon, these things seem to happen once in a lifetime, odd that.
 
#3
Never mind Gold, I can see the price of Ammo going through the roof, (no pun intended)!

Stock up on water, beans, whisky, coffee and logs, this could be a long and hard fought winter.. :cry:
 
#4
TopBadger said:
And they still don't think we've seen the worst.
I would agree.

Given Lehman Brothers, filing for Chpt 11, I wonder how quickly people here will realise that nearly 5000 people in the city are currently being briefed on how bleak their future is.

Then, I would guess that we'll witness any number of pension funds and similar players, start to tell their customers, that their pension / investment vehicle has had something of a multi-vehicle pile-up. The emergency services, in the shape of Alastair Darling, Gordon Brown and the FSA will rush to the scene, arms flailing, mouths agape - and do nothing.

Does HMG have any bonds with Lehman Brothers?
 

Biped

LE
Book Reviewer
#5
1930's anyone?

So, who fancies massive devaluation of currencies, massive poverty, starvation and some little jumped fella with a moustache coming to er, save the day?
 
#6
What interests me is the US govt's decision that Lehmann will not feature for a public money bailout. Why not? I'd like to see the detailed reasoning behind why one pack of swindlers gets off the hook thanks to taxpayers but another set doesn't....could be very instructive.
 
#7
Biped said:
1930's anyone?

So, who fancies massive devaluation of currencies, massive poverty, starvation and some little jumped fella with a moustache coming to er, save the day?
Hyperinflation isn't it? Paying for a loaf of bread with a wheelbarrow full of cash etc.
 
#8
At least as government employees we should be relatively protected from wage cuts and the like, enabling us to pounce on the weak, buy up vast quantities of cheap property and become rich beyond our wildest dreams.

Or be employed imposing martial law as society breaks down and gangs of chavs go feral.
 
#9
ABrighter2006 said:
I wonder how quickly people here will realise that nearly 5000 people in the city are currently being briefed on how bleak their future is.
And I wonder how many of the newly jobless bankers will miss their mortgage payments as a result...
 
#10
FFs all this couldnt have come at a worse time...I'm desperate to sell my house and get rid of the responsibillity as im on me own now and can barely afford it now, but if I put it on the market now it could take a year or may not sell at all.
Dunno what to do.. chance it or not..? cos lets face it the waves from this wall street crash are gonna be felt here probably harder than most places cos I dont think the UK are strong enough to fight this shite.
Brown has left us open and all within one year of office, so what now?
 
#11
Not stepping in is the right thing - they need to reasset 'moral hazard'.

They had to step in for Fanny and Freddy as they both had an implicit government guarantee... And even without this, if they hadnt, the whole US housing market (even the non sub prime stuff) would have tanked.

Lehman was a second rate bank, that went long structuring transactions in poor quality property deals. they got it wrong so should be allowed to fail. It's called capitalism.....
 
#12
pull2eject said:
FFs all this couldnt have come at a worse time...I'm desperate to sell my house and get rid of the responsibillity as im on me own now and can barely afford it now, but if I put it on the market now it could take a year or may not sell at all.
Dunno what to do.. chance it or not..? cos lets face it the waves from this wall street crash are gonna be felt here probably harder than most places cos I dont think the UK are strong enough to fight this shite.
Brown has left us open and all within one year of office, so what now?
Not an easy decision, but if you want to exit the house market then price your property below market value and take a relatively small hit now. If you hang on, and become increasingly desperate to sell, then your loss is likely to be much more severe.

Long-term trends put house price to average earnings at a ration of 4:1, indicating an average house price of £100K. We are currently at an average price of £175K - you can do the maths yourself, and if the market over-corrects, the £100K level is likely to be breached.

If you can comfortably hang, however, then do it. You haven't made a loss until you liquidate the asset and over the long-term house prices will regain an upward momentum.
 
#13
Not being in the financial world myself I was wondering how bad the current situation is in relation to the early nineties, late seventies etc.

Is what is happening typical of the "shakedowns" that happen every 15 years or so or is this indicative of something else?

As I say I'm no expert but I cannot help feeling that we had equal levels of gloom re currency/property/stocks etc in the early nineties? I also feel that those who have been prudent (both on a macro and micro level) will emerge relatively unscathered?

Fingers crossed.
 

Biped

LE
Book Reviewer
#14
pull2eject said:
FFs all this couldnt have come at a worse time...I'm desperate to sell my house and get rid of the responsibillity as im on me own now and can barely afford it now, but if I put it on the market now it could take a year or may not sell at all.
Dunno what to do.. chance it or not..? cos lets face it the waves from this wall street crash are gonna be felt here probably harder than most places cos I dont think the UK are strong enough to fight this shite.
Brown has left us open and all within one year of office, so what now?
What now, certainly for the UK is that it could VERY easily go HORRIBLY t1ts up.

If we have another Northern Rock, the gobment will have to go the same way as the US - there is NO money left in the kitty to bail out another failing bank - and we may yet have another one. So, when the first British bank goes to the wall, then it will start crashing down big-time.

If the gobment had not sold our gold cheap, and if it hadn't spent all the money we had PLUS borrowing billions and billions more, then it might be in a healthy enough position to assist.

The fact is, the gobment can't afford to reduce taxes to help us out, it can't borrow more money (well, it can, but it will hold back our economy for many, many more years until the tax payer has paid it all back), it has no reserves of gold or cash to do anything with, it hasn't got money to keep paying the 100,000+ extra civil service workers on the books, let alone give them pay rises (watch out for strikes) etc etc etc.

AFAIK, the gobment, short of borrowing billions more, has nothing with which to help the economy - IT is responsible for failing to keep a reign on the financial markets, and for allowing the housing market to get out of control. Before anyone says it's a free market - the gobment is exactly that - GOVERNMENT of the economy, the people, the country. If it fails to see the writing on the wall, and fails to take action in good time to prevent events such as are happening now, there is no point in it being there.

The fact that banks were allowing people to borrow 7-8 times their salaries, the fact that the electorate was in debt to the tune of over 1 trillion pounds and thus, incredibly susceptible to even the slightest downturn in the economy was clear for all to see. The gobment KNEW this, it KNEW the risks and it failed to take any action, even though that would have staved off this train wreck. Why did they not take action? Well, because the chancellor of the exchequor at the time (Gordon Brown) was too busy riding the tax gravy train, too busy spending money on stupid, ill-conceived and short-sighted 'utopian' projects while raking in the stamp duty and VAT from thousands of dodgy mortgages.

One simple law would have certainly helped the UK economy from being so susceptable to dodgy UK (not US) mortgages: A law that limited the mortgage one could get to 4 times one's annual salary MAXIMUM, and the banning of self-certification mortgages without concrete financial evidence of one's ability to pay.

With some measures in place and some back-up money in the system, this country would not be on such a knife-edge, and would not necessarily be as badly affected by a US downturn/crash.

As the US crash unfolds, the rest of the world markets are going to suffer too, but none so badly as the UK. As the US economy crashes, other countries will suffer a downturn, or even recession, but the UK will go down worse than just about anyone else, and more likely deeper than the US - ostensibly the cause of the global downturn.

Simply put, the policies of this government and its failure to act when the writing was on the wall 5-6 years ago means the UK is likely to be the very worst casualty of a global recession.

Good news folks - there isn't any.
 
#16
Well put Biped.

What more could we ask of a Prime Minister at this time? - Who better for the job, the former Chancellor, we above all countries, should be better able to manage this, for that reason alone.

The reality, is that under Tony Blair's premiership and Gordon Brown's time in charge of HM Treasury, indicates anyone except Brown is better placed to do the job. The City are going to be saying this, by lunchtime today.

This is going to get very bloody.
 
#17
I don't know my new pension is linked to the stock market , as its crashing right now in 20 years it'll be high and I'll have loads of dosh.













If Global warming does not happen or the Chinease take over cos the oils run out or the Plutonians invade and eat all out pets and stuff.
 
#18
pull2eject said:
Thanks for the heads up
Top tip, if/when you do manage to sell up, and you will if you set the right price; take what money you make and run like fcuk. Jumping-Ship to foriegn shores where the cost of living is considerably cheaper is an idea, and plan of action that many are taking, even if only for a temporary period. You ain't gonna miss much in the UK property markets for several years, although they will recover at some point.

In the early 90's when property slipped, for many parts of the country a full recovery took almost 10 years. I invested in an overseas property 5 years ago and have made a bigger percentage of an equity gain on that property in 5 years than I have on my UK property in 10 years. Avoid European countries as far as possible. Eastern Europe is becoming popular, as is Asia. But if you do go for it, taking the easy route will probably prove to be dangerous and with little return.
 
#19
heard_it_all_before said:
pull2eject said:
Thanks for the heads up
Top tip, if/when you do manage to sell up, and you will if you set the right price; take what money you make and run like fcuk. Jumping-Ship to foriegn shores where the cost of living is considerably cheaper is an idea, and plan of action that many are taking, even if only for a temporary period. You ain't gonna miss much in the UK property markets for several years, although they will recover at some point.

In the early 90's when property slipped, for many parts of the country a full recovery took almost 10 years. I invested in an overseas property 5 years ago and have made a bigger percentage of an equity gain on that property in 5 years than I have on my UK property in 10 years. Avoid European countries as far as possible. Eastern Europe is becoming popular, as is Asia. But if you do go for it, taking the easy route will probably prove to be dangerous and with little return.
That is part of the problem rather than a solution (in a general rather than personal way). Property (housing) should be considered as somewhere to live and not an investment.

Money (colloquially) is = to nothing unless people have faith in it. The economy we live in depends at the root on the availability of good food and water. That is what enables people to do jobs other than secure them (food and water).

For decades we have relied upon imported food and most people in the UK are divorced from food production. We have also moved most material production overseas. We have nothing to offer to an impoverished world.

Societies such as ours only exist because a few people can feed many. If that stops our society collapses. That is likely (not certain) to happen.

Reasons for food production being reduced include erosion of our soil, fish stock reduction and pollution.

Wall Street collapsing would not affect us in the UK if we where self sufficient. We are not.
 
#20
The FSTE 100 is taking a bit of a dive too.

The previous biggest ever drop was -323.5 (-5.5%) down to 5578 in January this year. At 12.24 today, it was -282.7 (-5.22%) at 5134.


Are we going to see that record broken again today? I think so.
 

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