If you have money in the stock market right now, I imagine that you are watching these events unfold with a lot of trepidation. Let’s recap some of the major headlines:
Fannie and Freddy are both under government control, which means the Feds now hold 42% of all mortgages…. Ouch.
Bear Stearns is no more, sold to JP Morgan with the government backing the sale.
Lehman Brothers is insolvent and bankrupt
Merrill Lynch has been sold to Bank of America at a fire sale price
AIG has also been bailed out by the Feds at the cost of $85 Billion.
Who’s next? My guess is Washington Mutual.
What does this mean to you? First of all your bank deposits and investment accounts are safe. There is no need to panic and run to withdraw and sell.
With that being said, it is my opinion that Cash Is King. That can be Yen, Euro, Dollars, or precious metals, but Cash is King. Stocks are beaten down and will be a great buy soon, but not today. Cash is King.
All of these companies are failing because they don’t have the cash to continue operations. Where is the cash you ask? It was lent out in adjustable rate mortgages to people who could not afford to pay their loans back. So they are left holding all these ‘toxic assets’ and are bleeding cash. These are huge banking and investing firms whose bankruptcy and fire sale helps no one.
Thanks for your perspective. You certainly know more than I do. I couldn’t begin to guess “who’s next?”!!