Quote:
Originally Posted by Sami
If someone doesn't step in...
when they start unwinding positions in a chapter 11 or in Lehmans case most likely it would be a chapter 7 bankruptcy ...
nearly 100 billion dollars of Toxic paper at Lehman alone is going to flood the markets.. and its going to cause other banks worldwide holding the same type of toxic paper start having to right down billions upon billions of dollars ... causing many to go insolvent.
Never mind all the credit default swaps that were written to hedge alot of the lehman debt...
On top of this now defaults in Prime mortgages are at a rise.. and alt a mortgages are reseting... with 6.1% unemployment rate and getting worse... I think over the next few years we'r going to be seeing the 10%+ interest rates of the late 80s... as inflation sky rockets!
The situation is so severe out there right now its compareable to the Great Depression...Remind you wallstreet is always predicting whats to go down in the economy 6 - 9 months ahead... and it hasn't even gotten that bad yet in the street...
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the market and these financial stocks have definitely taken a hit, especially the ones with poor debt like LEH and WM. The writing is on the wall and a lot of their market cap is already given up. However, people forget how interwoven the economy of the world is, and now will begin a global economic downturn. If the USA economy sneezes, the whole world catches a cold. I don't think inflation is going to get out of hand, but I do see the Dow dipping below 10,000 virtually giving up all the gains of the last bull market. We're already 3 years into a downturn, and we need home prices to stabilize before it will get better. A lot of these financial stocks going down I think are limited to the financial sector, however the system will take a hit and it will in turn affect everyone else. I see it getting worst, but all that means to me is the people who are heavy on cash can make a killing in the long term with all the opportunities abound.