It is apparent to anyone watching the stock market, the falling AIG stock price, the potential for the Lehman Barclays deal, and a possibly disastrous AIG bankruptcy, that consumers are afraid to lose what is left of their nest eggs.
In the wake of a tumbling Dow Jones, hushed whispers of a stock market crash and frantic activity at the New York Stock Exchange, Wall Street mavens are calling for the Fed to cut interest rates in a last ditch effort to overcome Bank of America stock prices -- and Merrill Lynch as well as Morgan Stanley stock price doubts -- with a shot in the economic arm.
Stock Market Analysis
Stock market analysts claim to know what ails a floundering Wall Street: the aftermath of the mortgage crisis. USA Today reports that the seemingly unprecedented drop in the stock market is due to the precarious fiscal empires of Lehman Bros, Fannie Mae and Freddie Mac, Countrywide, and even Merrill Lynch finally toppling.
As the DOW took a 504 point nosedive, other companies are being sucked down the spiral as well. The Street pulls no punches as it details the downgrading of insurer AIG stock prices. Once known as AIG Valic, AIG stock prices join Con Edison, Eli Lilly, and even PG&E stocks; investors are eyeing the Dow Jones and worry about another stock market crash.
The British Are Coming, the British Are Coming!
The news is not all bad, however, since across the pond there are some signs that foreign investors are taking a closer look at America's floundering Wall Street. According to the Associated Press, London's Barclays PLC is making overtures to buy some of the assets Chapter 11 bound Lehman Brothers has for sale. Whether or not advantageous for Lehman, Barclays' interest might inject some much needed capital into the transaction.
As rumors of an AIG bankruptcy send not only its stock prices but also associated industry stocks -- such as the Merrill Lynch stock price and also Morgan Stanley stock price - onto a topsy turvy course, it bears remembering that the much feared New York Stock Exchange Black Monday is not a new occurrence.
A Brief History of Time
As a matter of fact, even recent history shows a cyclical appearance of Black Monday responses to late Friday company press releases and weekend world news. For example, the Black Monday Wall Street jitters that rocked the stock market yesterday occurred in the wake of Lehman Brothers' Chapter 11 bankruptcy filing and also the news that Bank of America had acquired Merrill Lynch.
Take for another example January 21st, 2008. Even as there was no trading on Wall Street itself due to the federal Martin Luther King, Junior holiday observance, stock market movers and shakers were not idle and watched with apprehension the tumbles of India's and also Hong Kong's stock indices.
KPTM Fox 42 quotes the Associated Press account that points to the combination of international fiscal shenanigans and a serious doubt over the Bush Administration's economic stimulus package that led to an investor led run on Wall Street on the next trading day. A scant day later, BBC News reported of a stock market recovery in the wake of an interest rate cut by the Federal Reserve.
The BBC pointed out that even spiraling commodities markets quickly recovered and once again picked up appreciably.
2008 a 1987 in Disguise?
21 years prior to this occurrence, there was another Black Monday that sent the stock market reeling. During the onset of the holiday season on October 19th, 1987, the Dow Jones Industrial Average went down by more than 22%. The Motley Fool put together a stellar account of the year 1987 and a snapshot of the stock market which, at that time, appeared to be plagued by fraud, and empty promises.
Sent over the edge by the 10-19 shelling of the Iranian oil platform located in the Persian Gulf, the Motley Fool concludes that it was not a single event, but instead a series of seemingly only tangentially related incidents that - much akin a slow fuse to a powder keg - finally set off the explosion.
Back to the future, today is not really that different from 21 years ago. A series of unfortunate events, speculation driven transactions, poor planning on the parts of consumers, corporate greed, and a failure to put down the governmental foot a lot sooner on haphazard corporate accountability have brought America's chickens home to roost (maybe this is what Jeremiah Wright was talking about?).
The worst thing you could do right now is place all of your nest eggs into one basket, while the best thing to do is to diversify your investment portfolio, keep a good chunk of cash in an FDIC insured high interest savings account, and then hold on for the ride. If your blood pressure permits, get in on the action and speculate, but you stand a good chance of losing your shirt.
Sources:
http://www.usatoday.com/money/industries/banking/2008-09-15-wall-street-meltdown_N.htm
http://www.thestreet.com/story/10437582/1/analysts-upgrades-downgrades-aig.html?puc=googlefi&cm_ven=GOOGLEFI&cm_cat=FREE&cm_ite=NA
http://ap.google.com/article/ALeqM5ju2ZNQJKzPMYpXCucI3pKpp0BWuQD937PCGO0
http://www.kptm.com/Global/story.asp?S=7750403
http://news.bbc.co.uk/1/hi/business/7201658.stm
http://www.fool.com/features/1997/sp971017crashanniversary1987timeline.htm
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