Wall Street giant Lehman Brothers has fallen, Merrill Lynch has sunk into the arms of Bank of America and traders smell blood from global insurer AIG. Who’s next?
The New York Times has called this one of the most dramatic days in Wall Street’s history. The whole thing brings ominous tidings, says Fortune magazine. Expect more dramatic articles in the coming days as the media is whipped up into a writing frenzy.
Lehman employs around 3,000 staff in Asia and everyone must be on pins and needles waiting to find out what will happen to them. On the local front, only AIG among the big names mentioned in the news today, has a big consumer base in the Philippines, Philamlife being a member-organization of the insurer. (UPDATE: My local source says Philamlife has its own financial resources and will not be affected much by AIG’s troubles. I am waiting for an official statement from the company.)
But its no wonder gold prices are again on the rise (people tend to flock to gold whenever they are scared). This level of fear has gotten 10 big banks to come together and create a $70-billion fund to protect financial institutions from fallout coming from Lehman’s collapse.
The mechanics for this fund is not yet clear (for example, AIG is asking the Federal Reserve for a $40-billion lifeline to survive. Can it access the fund if the Fed demurs?). As it is, market watchers are concerned that bailing out companies in trouble may give financial markets temporary uppers, but it doesn’t mean the costs will not show up somewhere else. The US taxpayer’s bill, for instance.
All in all, this is a recipe for sleepless nights. Get ready for financial ramifications as this time, Wall Street’s troubles could really end up, in a big way, on our shores.
July 4th, 2009 at 8:44 am
[...] but not the least, I invite you to read Salve Duplito’s blog Money Smarts to be in tune with financial issues going on in the [...]
September 17th, 2008 at 8:55 am
Here’s How Did Lehman Failed.
September 17th, 2008 at 5:00 am
[...] but not the least, I invite you to read Salve Duplito’s blog Money Smarts to be in tune with financial issues going on in the [...]
September 16th, 2008 at 7:26 pm
the real troubling fact is not that Lehman had collapsed or that AIG is on the brink. the real trouble will start to emerge when the creditors start to assess the carnage and what these will cost them.
remember that Lehman is an investment bank, and that at the time of collapse, it’s debt stood at more than $600 BILLION. now, this means quite a few of global banks are looking at their combined $600 billion as possibly going down the drain.
the fallout from AIG should it collapse will be even worse, since it is the world’s largest insurance. insurance companies are such that they guarantee assets far larger than what they have themselves, and so when they collapse, or even have their credibility questioned, the assets that they back are also affected.
we are all in a serious situation, and there is no place for sugar-coating here. let us not get crippled by fear, but let’s also not hide under a rock and hope everything will be the same when we emerge.
September 16th, 2008 at 1:25 pm
my 2 cents…… looking at the troubled banks….. the most stable looking right now i think goes to citibank…. why?
they were 1st to writedown huge debt, middle eastern money bailed them out by infusing funds…… others … no idea….
i think the most liquid region right now is the middle east…… citibank backed up by middle eastern funds….. relatively safe bet…..
September 16th, 2008 at 11:16 am
From what I know with Philamlife: they’re safe from the AIG mess and you could thank the Insurance Commission’s tight investment rules for that. Still, you can write IC to be doubly sure: http://www.insurance.gov.ph
September 16th, 2008 at 9:28 am
I hope not. How can they deny the fact that AIG sent three of their best men to take the helm of Philamlife last year. These three men basically run the company with Mr. White Boy only having a honorary title. And come to think of it, for the past four years, the company has been bleeding. I’ll keep my fingers crossed.
September 16th, 2008 at 8:50 am
subprime + doctored ratings = lehman brothers, ML, AIG and many more.
and so the equation continues until both of these 2 US Presidential candidates offers some bold solution to the financial crises going on. unfortunately both are busy throwing pigs and lipstick at each other.
September 16th, 2008 at 8:13 am
Salve,
Hopefully your sources are correct. I have college plan for my son which is one payment short from being fully paid so what happens to AIG and Philam really concerns.
I am just a bit doubtful if these institutions are telling the whole truth. Remember, that these finance companies are the same companies that first denied that there is a credit crunch, then denied that their exposure is huge, then refused to writedown their investments until we get to this point.
September 16th, 2008 at 8:05 am
really sad news Salve,
2 of my friends are still working for Lehman brothers in Japan. I hope they’re fine.
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The Pinoy Entrepreneur
September 16th, 2008 at 6:58 am
My CEO has been tracking this problem and providing very accurate predictions for several months now. At first we thought he might be exaggerating but pretty much everything he has predicted has come true. http://canadianbullshit.com/crisis.html
We think that real estate will fall in value by up to 70%, 50% if we are lucky. Unfortunatley the worst is yet to come and even Alan Greenspan is warning this is the worst crisis in 100years. That is a subtle way of saying this is worse that the 1929 stock market crash.
Unfortunately the traditional media backed by the rich and powerful finanncial interests have too much to loose to tell us what is actually going on right now. So I think we just need to review the facts. It could very well be that we are headed to a world depression before bottom is reached and the situation enters a new cycle. This is not good. Good Luck everybody and remember that every day above ground is a good thing!
Marcie M. Farsea (Miss) Corporate Secretary, Author (YOUR VERY FIRST BILLION)
September 16th, 2008 at 3:32 am
scary, could this be the start of the “dominoe effect”?
September 16th, 2008 at 12:55 am
This news reminds me that what happens here in US affects the whole world’s economy. Having reside here in US for sometime, I am sometime oblivious that the mortgage crises here also affects other parts of the world.
September 16th, 2008 at 12:15 am
I got really sad after seeing people suddenly unemployed in the news. My first reaction was fear, then suddenly, came the an overwhelming desire to reach my financial goals faster, taking a positive outlook out of the negative.
September 15th, 2008 at 10:46 pm
if you have some money to spare, this is the best time to start accumulating shares of compnies with high potential rebound. for a start check alliance global, megaworld, meralco, benpres, first philipine holdings, ayala land, sm, among others. the ball is round….
September 15th, 2008 at 10:33 pm
It’s horrifying to realise how much global damage has been done by several people who do not know how to pay their mortgages and debt properly…
These high-risk debtors defaulted on their debt, which paralysed US banks, which resorted to the Fed lowering the dollar’s interest rate, which in turn weakened the dollar and caused oil prices to soar (as a result of lower dollar purchasing power and investors shifting from stocks and the dollar to oil speculation), and finally causing widespread inflation, stagflation, unemployment and/or a looming global recession.
At the same time, the paralysed banks continue to bleed money (and even shut down or be taken over) due to these toxic losses caused by these irresponsible (and idiotic) debtors.
Simply horrifying… Irresponsible debtors triggered a global economic pandemonium…
September 15th, 2008 at 10:13 pm
Hi Salve,
How will the AIG problem affect my investments in Philam Asset Management? Do you think I should pull this out?
Thanks.
Mike
September 15th, 2008 at 6:39 pm
It’s frightening how fast the credit crisis has spun out of control and how quickly we are seeing financial giants falter and fall one after another.
I wonder how AIG’s restructuring will impact the Philippine operations.