No abatement in the credit crunch and worsening of the market meltdown!!
Linda says:
Credit Crunch is developing into a global stock market rout which will affect more than just the market players.
We predicted on 19th november 2007 that world stock markets were looking dicey - and we were correct! Developments in America mean that money is likely to get tighter around the world and recession beckons. To quote Professor Roubini from New York University, “ This will be a much worse recession than the ones in 1990-91 and 2001.” The performance of global stock markets is summarized in the word CRASH!
There are ongoing problems emanating from the US, that are going to affect ordinary mortgaged householders and investors far away. Globalisation has a nasty side effect, in that as economies are more interrelated, problems spread easily from one to the other.
Whilst the massive losses at Citigroup and Merrill Lynch have been exposed, further problems lurk below the surface with the companies that insured many of the mortgage –backed securities.
These are organizations that normally do not rate much of a mention, but in the current climate are likely to be the next source of problems and headlines. The share prices of two of the largest such companies, Ambac Financial and MBIA have fallen markedly in recent times and a smaller insurer, ACA Capital is on the brink of insolvency. Panic that very major problems are developing is behind the tumultuous headlines.
The insurance that various financial institutions relied on to guarantee their bonds and securities is now questionable, with downgrades of these insurers expected. If this occurs, further write downs, and less money available for lending will be the consequence. This will put a further strain on many banks,with more headline losses.
Legendary investor Warren Buffet’s company, Berkshire Hathaway has set up a new bond insurance business in December and could do very well. His is a new business and therefore has no questionable loans hiding in the closet.
But the problems of his competitors, are likely to raise interest rates on loans, far away from Wall Street.
And what was fear last week, is now turning into panic.
