'Utter carnage' is how one trader described events as he caught the train home from Canary Wharf on Friday
Yeah whatever, go on...
More than £600bn has been wiped from the value of shares of companies listed on the FTSE 100 since it climbed to 6,732 on 15 June 2007. Now the index is trading at around 4,000, a 40 per cent slump in 12 months,
By my calculations that is 4.553 to the power of -7. Of course, I don't know what that means. I think it means that every point of the FTSE was worth 4.5 Billion before. So the FTSE used to be worth 30,294 billion. So now the FTSE is worth 18,000 billion.
Yep. They're right.
59.4177.
I thought you rounded it down if it was less than five?
That will have a big impact on the value of pensions
Yes, they told us that at work.
Mark Otswald, an analyst at Monument Securities, describes the last few days as 'sheer, bloody panic. The Western financial system is breaking down.'
They didn't tell us that.
Apocalypse now? 'Let's hope not,' says Gerard Lyons, chief economist at Standard Chartered
Hear hear, Gerard...
they don't know how bad things are going to get, so the temptation is to dump assets, no matter what.'
They always trot out that line, don't they. I always wonder who 'they' are.
The first priority is to free up the money markets where banks lend to each other to ensure there is sufficient credit around to lend to businesses and mortgage borrowers. Ominously, that isn't happening,
I wonder where the money is ending up.
David Frost, director-general of the British Chambers of Commerce, says: Companies are being squeezed and capital expenditure will be cut
Oh well, that's all right then. Capital expenditure is planned for and paid for in advance, by the government sometimes, isn't it.
Many businesses are already low on cash because of higher costs - such as fuel bills - and weakening consumer demand
Aaah, is that so.
(I saw three Hummers in the carpark at the superstore in Spryfield today... I swear to god I did).
The bank also charged £35,000 in fees. Derek Simpson, general secretary of the Unite union, says: 'The banks are trying to hoard cash and squeezing everyone down the chain
Aha. The banks are hoarding cash are they? There's a surprise.
September, there was a net outflow of $72bn from American mutual funds, and the figure for this month could be even higher.
In Britain, retail investors have held their nerve, although there was a £500m outflow in August
I have no idea what this means. But it sounds important.
But hedge funds are major sellers. That is happening for one of two reasons: either because banks are making margin calls, where they ask for more security as debt becomes dearer to service, or because investors are taking fright and cashing in their chips.
This is where I started to get interested. Why does the journalist not know why this is happening? He's already pointed out that the banks are hoarding cash.
Rich individuals, including Russian oligarchs, are also selling, in particular where loans are secured against equity stakes in companies under their control. As stock prices fall, banks are demanding more security from tycoons, many of whom have tied up their wealth in shares
If I were the banks, and I had totally fucked things up, and broken all the rules, and destroyed the meaning of the word trust, and been cast out in the street, and had to break back in and sit in the corner snivelling and begging, until I got the shrug that meant you had gotten away with it for about fifteen minutes, I would be hoarding too, obviously,
Ukrainian oligarch and iron ore miner Kostyantin Zhevago was forced to sell a 20 per cent stake in metal company Ferrexpo last week because of the steep fall in the price of commodities. Russian billionaire Oleg Deripaska has sold 20 per cent of Canadian car parts maker Magna
To whom have these people had to sell their said to be one time ill-gotten gains?
who bought 20 per cent of Magna?
and why was it not on the news?
Or did I miss it?
When the world's wealthy elites are forced to sell shares, it not only adds to the downward pressure on financial markets, but also takes spending power out of the economy, with spin-off effects for sectors as diverse as luxury goods, property and investment in jobs
Why? Do the people that buy them not have any fun ever? Do they just sit and count their money?
Who could these people be?
Who doesn't like to have fun?
The Depression of 80 years ago was compounded by the fact that wealth was controlled by an even narrower spectrum of society than today; the effect of wealth destruction for a few was felt disproportionately by the rest of the population. Nevertheless, a version of that nexus exists today
What does this mean? It is counter-intuitive to me? Surely if a wider range of people have money the risk is spread? Am I missing something important about percentages here?
I was never any good at gambling.
Oh no!! I get it now. It's the same as I think, it's just too academic for me to understand it.
the insurance companies have escaped relatively unscathed, and fears that they might have to sell shares to increase their solvency ratios to make good a decline in equity prices appear overdone.
In 2001-02, British insurers such as Standard Life were forced to sell equities to meet capital adequacy requirements, but today insurers are less vulnerable.
Ahaaa!!!! This has happened before.
But not to the banks.
That's why it's terrible this time.
Of more concern are the potential liabilities hanging over credit default swaps, a huge unregulated sector that few people know about or understand.
Does anyone know what a credit default swap is?
Over the last 12 years, the value of the CDS market, where these contracts are traded like other derivatives, has grown to $55 trillion. CDSs have been used to insure risky mortgage bonds, as well as the debt of collapsed institutions such as Lehman Brothers. The worry is that insurers and banks that underwrote these instruments will not be able to meet their liabilities.
And they are?
With judgement, and perhaps a little luck, the financial crisis that has enveloped the world can be brought under control via a global rescue plan, but the aftershock will almost certainly be with us for years to come.
Yes, boys and girls, that's the end of the article. I swear to god it is. And there are no comments.
Investopedia says that a credit default swap is
A swap designed to transfer the credit exposure of fixed income products between parties.
The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap. For example, the buyer of a credit swap will be entitled to the par value of the bond by the seller of the swap, should the bond default in its coupon payments.
So in the case of Lehman Bros, they sold 'toxic something or others' and then they did a credit swap with someone else. The someone else gets the insurance. And then the insurance company can sue Lehman Bros for the pay out costs when the 'toxic something or other' collapses.
So the government is buying the toxic something or others so that means the government will have to guarantee the creditworthyness of the product.
So how will the government do that? Does it have to guarantee it to itself and just take the hit?
Why on earth would anyone do any of this?
If I am reading this article right, somebody has done this to the tune of $55 trillion.
This is the teenage equivalent of being in so much trouble that it's worse than the time that despite your best efforts at being sorry the cops rang the house in the middle of the night after they'd picked you up when you were puking up on the street purely to wake your parents up straight after they'd finally gone to sleep right after they had had an argument.
You'd think someone would fucking understand the pain they're all in, wouldn't you.
I do.
he he he
What has to happen now is that trust has to be re-established.
How many times have I heard that this month.
And now I finally understand
Who do YOU trust?
With the greatest respect to Richard Wachman and Tim Webb.
No comments:
Post a Comment