There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:
- Lehman Brothers, the United States’ fourth largest investment bank, filed for bankruptcy protection. Lehman’s filing is the largest bankruptcy in U.S. history.
- Bank of America agreed to acquire Merrill Lynch for approximately $50 billion in Bank of America stock (based on current stock prices).
- Hewlett Packard announced it will reduce its workforce by approximately 25,000 jobs or 7.5% of its total workforce as part of its plans to restructure.? Oil prices closed below $100/barrel for the first time in over six months.
- Hurricane Ike tore through Texas leaving a path of destruction behind. As many as 3.9 million people were left without power.
- The percentage of people delinquent on their credit card payments rose in the second quarter by 8.6% when compared with the same period in 2007.
- According to government reports, the nation’s industrial output plunged in August by four times that amount that had been predicted.
- In 2009, most cities across the United States will face financial hardship as a result of declining property tax revenue, high energy costs and other economic hardships. Officials from 319 municipalities across the country say they anticipate more layoffs of municipal workers, cutbacks in nonessential programs, and higher fees.
- Gasoline prices increased significantly during the past week as a result of Hurricane Ike’s impact on oil refineries in the Gulf.
- The Fed seized control of American International Group (“AIG”), the nation’s biggest insurer, to prevent a bankruptcy filing by AIG. The Fed concluded that AIG was “too big to fail” and that its bankruptcy would have a potentially catastrophic impact on the U.S. economy
- Several noted money market funds, Reserve Primary Fund and Reserve International Liquidity Fund LTD, Putnam Fund Money Market Fund and a similar fund sponsored by Bank of New York Mellon Corp. have “broken the buck,” meaning that investors in the funds have lost some of their principal.
- Distressed investors are reportedly fleeing money market funds.
- The U.S Treasury has announced it would begin selling bonds for the Federal Reserve in an effort to help the Fed deal with the unprecedented borrowing it was providing in the current credit crisis. The auction will apparently involve the sale of cash management bills that mature in 35 days.
- As of September 17, the Federal Reserve has sent a record $59.8 billion to securities firms.
- The U.S. Treasury announced plans to use as much as $50 billion to temporarily protect investors from losses in money market funds.
- Automakers, GM, Chrysler and Ford, want $25 to $50 billion in guaranteed loans to help them comply with new government regulations.
- The U.S. Treasury Department and Federal Reserve are reportedly discussing a plan similar to that used by the Resolution Trust Corp. in the 1990s to move troubled assets from the balance sheets of American financial companies into a new institution. The proposal apparently contemplates the Treasury and the Fed taking over distressed assets held by financial companies. The government failed to disclose how much risk this would transfer to the American taxpayer.
- Credit Suisse, SunTrust, Comerica, and Washington Mutual have announced settlements with regulators over auction rate securities.
- So far this year, 605,000 jobs have been eliminated. Some analysts predict that this number could grow to 1 million jobs eliminated by year-end.
- Morgan Stanley and Wachovia are reportedly discussing a potential merger.
Page Perry’s Market Monitor is published periodically to give investors an overview of certain recent developments impacting the economy and/or the investment markets.