“Once in a Century”- type of event
Did we really have to witness it?? . Greenspan is of course refering to the whole chain of recessionary events that started with subprime crisis. In fact, last year, everyone refered to sub prime related news as tip of iceberg. That resulted into most of us waiting for the news in the offing. So it may seem that the second leg of the chain of events has kickstarted today with the companies of such reputation and intellectual capital going bankrupt. There’s lot more to come I presume, how much more is the question.
Domestically Sensex Crashed, tech stocks slumped and overall market reacted strongly to the global cues. A spate of rumours began including the one about 2-day notice that the local Lehman Bros KPO employees were given. We dont know for sure if this is really true, but if it is, its scary and Greenspan promises much more. He said that America has less than 50% chance of evading a recession . Well, we’ll interpret that as world having a less than 50% chance to do so! Spill over effect will be just tremendous, say for instance – a heavily leveraged company! might have had plans of refinancinng their debts, will now be suddenly in the market without any takers for their debt issue / lenders. That will result in less than optimal debt servicing due to high cost of interest, stalling of further plans of expansion, and spill over effect of global cues, high cost of debt and general slump in markets leading to further downgrading of their own debt. Some sort of cycle leading deeper and deeper into recessionary situation! All in all, not only the investment banks have tumbled, they shall be taking several of their stakeholders along with them…
In a lesser depressing news, I have managed to achieve my goal for the day to an extent. I left sharp at 7.30 pm today and reached even before 8.30 pm at home, read newspapers and watched some TV – mainly India Business hour and finally am posting here… so all in all achieved everything that I’d decided except the jog of course. Still 9 days to go, lets see..
Posted on September 15, 2008, in Interest Rates, Macroeconomics, Personal, Sensex, Sub Prime Crisis and tagged AIG, bankruptcy, Lehmann, Merril Lynch, recession, sub prime, WAMU. Bookmark the permalink. Leave a comment.