Yours truly is hitting the road early and so will be out of reach for the morning of all the websites and news…good thing…because when the market opens at 9, all hell is going to break loose. I’m not sure how many people on Main Street understand the deep panic underway among the financial gurus and mandarins. No one knows where the bottom is.
It became more obvious that the tailspin is under way when you watched the pictures on the web over the weekend of heads of Lehman Brothers and Merrill Lynch and various bankers sneaking in and out, with weekend tieless clothes, of meetings at the Federal Reserve office. There is grand panic here that it is all unraveling.
Indeed, the overnight markets are in a freefall:
In Europe, the Dow Jones Stoxx 600 Index declined 3.4 percent to 270.81 points, while the FTSE fell 3.8 percent and the CAC-40 in Paris lost 4.1 percent. Stock markets in Japan, South Korea, Hong Kong and China were closed for holidays, tempering losses in Asia although other markets there declined. The benchmark Taiwan index shed 4.1 percent.
U.S. stock index futures were down sharply, suggesting that shares would drop when trading opened in New York on Monday morning.
No one know where the bottom is. Even with the takeover of Freddie Mac and Fannie Mae by the U.S. government, the fears are still there as first Merrill Lynch is sold and Lehman Brothers is going to see bankruptcy:
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.
The key word in the above snippet is "frantic". They are panicked.
My two reactions are: be afraid, be very afraid. And, if anything has exposed the failing of the free market and those who run it, boy, this has making this a teachable moment, if painful one.
