Dow Plunges 500 Points Amid Financial Meltdown
Lehman Brothers (LEH), Merrill Lynch (MER), and American International Group (AIG) flooded the headlines today as the Dow Jones had its worst session since September 11th, 2002 also remembered as 9/11. Lehman filed for Bankruptcy, Merrill announced it was being bought out, and AIG borrowed $20 Billion to try and keep itself liquid.
Lehman’s work force of 25,000 came in today with boxes and bags as its corporate office in New York had security personal and even a watch dog guarding its front door. For most employees the Lehman bankruptcy is a double edged sword as not only are they losing their jobs, but also their retirement funds which were mostly held in stock and stock options.
And while Lehman employees were packing their belongings Merrill Lynch’s (MER) staff of 60,000 were cautiously feeling relieved. Bank of America (BAC) announced they would be buying out Merrill for $50 Billion in an all stock deal that saved the company’s stock from falling even further in value. For some employees this means they will still have their retirement accounts, but for others it means they will be soon losing their jobs as the acquisition unfolds.
With Bank of America announcing its buyout of Merrill it makes a statement that it is not having severe liquidity problems, unlike American International Group (AIG) which today was at the mercy of Wall Street. The stock tanked just over 60% to close under $5 per share even with its announcement that it would be allowed to borrow $20 Billion from its subsidiaries.
All of the chaos had the market bleeding heavily as both the S&P 500 and the Dow Jones Industrials closed at fresh 2008 lows. The Dow fell a staggering 500 points or 4.42% and the S&P 500 fared even worse closing down 4.71%. The NASDAQ finished down 3.6%.
So who is the next financial institution set to go belly up? Goldman Sachs (GS), Washington Mutual (WM), and American International Group (AIG) are just a few fair bets…
That guy says it all, all I wonder if what will happen tomorrow.
As for what company is next, Washington Mutual closed at $2 even which seems like a good prospect
In addition tothe suspects listed above, I am also hearing whispers of UBS. I don’t think there is a sacred cow in this sector anymore that is untouchable. Just a month ago GS were the “smartest guys in the sector.” Now their stock is trading at 2006 levels.
I could be wrong, but if GS and JPM don’t join forces and become lenders of last resort for AIG, tomorrow may be worse than today. I don’t know how the market will receive a rate cut and I don’t know how the market will respond if we don’t get one.
About 3 months ago I closed my accounts out at WAMU, but I have some cash left in one. My thought process, borrowed from a buddy, is that if they fail I want to get a letter from the fed telling me how everything is going to be OK. It’s worth the $20 to be part of something special
“My thought process, borrowed from a buddy, is that if they fail I want to get a letter from the fed telling me how everything is going to be OK. It’s worth the $20 to be part of something special ” Sounds like a good plan! You should keep the letter as memorabilia.
UBS is another good prospect for collapse. I agree, no one is safe.
Could be a very good prospect! I am really curious to see what happens with the markets tomorrow. Could there really be another large sell off?
Frame it and you have a piece of financial history