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:
- The Bush Administration proposed a $700 billion bailout plan to purchase bad mortgage investments from financial companies.
- On Monday, September 29, Congress rejected President Bush’s proposed $700 billion bailout plan.
- On Monday, September 29, the Dow Jones Industrial Average plunged 778 points.
- Later in the week, the markets rebounded somewhat as Congress decided to reconsider a modified bailout proposal. Indications are that some form of this bailout will pass.
- Latin American countries report that they are in a serious economic crisis and their recent economic expansion may be coming to an end.
- On September 29, 2008, the Federal Reserve announced it would pump an additional $630 billon into the global financial system.
- U.S. industrial production plunged 1.1% in August.
- The head of the International Air Transport Association stated that at least 20 international airlines are at risk of bankruptcy.
- The National Automobile Dealers Association says that new-vehicle dealership closures may rise as much as 40% this year.
- New car and truck sales in September fell below one million vehicles for the first time since 1993.
- JP Morgan estimates that European banks may write down as much as $40 billion in the second half of 2008.
- U.S. manufacturing activity has hit the lowest level since the aftermath of September 11, 2001.
- Bank of America estimates that the U.S. Federal Reserve will lose as much as $6 billion on mortgage backed securities it took over from Bear Stearns.
- Experts predict that retail sales in November and December will be the worst in at least three decades.
- The U.S. Treasury announced plans to use as much as $50 billion to protect investors from losses on money market mutual funds.
- After having opposed regulation of credit default swaps, SEC Chairman Christopher Cox announced that credit default swaps must be regulated “immediately.”
- Several money market funds sponsored by the Reserve Fund Management Company “broke the buck.”
- The FBI announced it was investigating potential fraud at Fannie Mae, Freddie Mac, Lehman, and AIG.
- JP Morgan agreed to buy most of Washington Mutual’s deposits and branches.
- Institutional Risk Analysis estimates that, by the end of 2009, almost 100 U.S. banks with assets of more than $800 billion will fail.
- Reports indicate that as much as $37 billion of the $85 billion which the United States used to bail out American International Group went to investment banks, including Goldman Sachs, Merrill Lynch, Morgan Stanley, and Deutsche Bank.
- Brokers in the financial services industry are well compensated. In 1975, financial-services workers earned $5 of every $100 paid to American workers. By 2008, that number had increased to $10 of every $100 paid.
- Commercial banks and bond dealers borrowed $348 billion from the Federal Reserve this week. This was an increase of 60% from the prior week.
- Marriott International, a leading provider of hotel services, announced that its third quarter profit dropped by 28%.
- The Commonfund, an investment adviser serving hundreds of colleges and private schools, has restricted withdrawals from its Short Term Fund and Intermediate Term Fund. Wachovia Bank, a trustee for the $9.3 billion Short Term Fund, announced earlier this week that it was terminating the Short Term Fund. The fate of the Intermediate Term Fund remains unknown.
- U.S. payrolls dropped significantly in September, indicating that the economy may suffer its worse recession in at least 25 years. The unemployment rate remained at 6.1%. Payrolls sunk by 159,000 jobs.
- The price of oil has dropped to $94/barrel.
- Earlier this week, Citigroup announced that it would acquire the banking assets of Wachovia.
- Today, Wachovia and Wells Fargo announced a $15.1 billion merger deal.
- Today, Citigroup demanded that Wachovia and Wells Fargo abandon their $15.1 billion merger deal. At the same time, the FDIC announced that it “stands behind” Citigroup’s efforts to take over Wachovia.
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.