Sunday 14th September 2008
- Frantic talks during the weekend fail as Paulson states that there will be no Bailout for Lehman's. The bank is dumped by potential suitors such as Barclays and effectively allowed to go bankrupt.
- Stocks expected to tumble Monday, threatening the start of the next leg of the stocks bear market.
Monday 15th Sept.
- Lehman's declares bankruptcy, serious risk of default on country party derivatives result in central banks pumping in $100 billion into the money markets which follows the announcement of $70 billion on Sunday as they attempt to contain the impact of Lehman's bankruptcy.
- Bank of America takeover of Merrill Lynch for $50 billion, the worlds third largest Investment bank to prevent a Lehman's style bankruptcy.
HBOS, Britain's biggest mortgage bank crashes 30%, after being targeted by short-selling hedge funds that sought a similar fate for the bank as Northern Rock. I was probably one of the first to break the news of an hedge fund assault on the bank as a similar attack of March this year was still fresh in my mind, therefore had a head start on the scrambling mainstream media that only started to connect the pieces together some 24 hours later. - The worlds largest insurer AIG seeks bailout cash, with speculation that the insurer seeks a loan of between $30billion and $75 billions from the Fed.
- Stock Markets Crash, Dow Jones ends down 504 points.
Tuesday 16th Sept
- Money markets freeze with the interbank rate (LIBOR) jumping to 6.75% due to the extreme risk of counter party default.
- No US interest rate cut, despite calls and speculation that the Fed could cut by as much as 50 basis points.
- AIG, the worlds biggest Insurer bailed by the Fed for an initial $85 billion for an 80% stake in the insurer.
- Stocks bounce on AIG bailout, Dow Jones rallies 142 points.
Wednesday 17th Sept
- HBOS taken over by Lloyds TSB for £12 billion amidst a stock price crash of 66% in 3 days. The shotgun wedding was to prevent another Northern Rock style collapse and nationalisation, precisely the possibility warned of on Monday. My analysis called for restrictions on short-selling to give distressed financial institutions room to breath.
- Gold as a safe haven soars by historic one day move of $85 following the news of the AIG nationalisation, and Lehman's continuing impact on counter parties with no end in sight to the crisis.
- Russians shut down their exchanges fearful of a similar collapse to that which followed the LTCM crisis a decade earlier.
- Stock market slide resumes as the market lines up the next financial dominos to fall, investors fearful of capital losses dump financial's. Dow Jones ends down 450 points.
Thursday 18th Sept
- Lloyds TSB takeover of HBOS confirmed for £12 billion ($21 billion) or £2.32 pence per share in a all stock deal.
- Central Banks around the world flood the markets with over $250 billion more cash as the interbank markets freeze sees the money market rate surge to above 6.75%
- Morgan Stanley the next big investment bank to be targeted, with expectations of merger with Wachovia.
- UK FSA announces a ban on short-selling of financial stocks, I suggested this as a necessary move some 24 hours earlier. This and the central bank extra liquidity is seen as extremely bullish on a short-term basis at least, as short covering will lead to a strong rally as well as speculators jumping on the band wagon.
- US Stocks soar in late trading following speculation of further restrictions on short-selling and a huge bailout. Dow Jones ends up 410 points.
Friday 19th Sept
- US Treasury announces the Mother of All Bailouts - Stocks soar across the board on the intention to allocate an initial $700 billion and probably countless trillions more to buy up much of the financial sectors bad illiquid debt. the UK FTSE rockets higher by 8%.
- SEC also expands short-selling restrictions to 799 financial stocks, which contributes to the short-covering rally that leaves the Dow Jones up 369 points.
- Washington expands the "mother of all bailouts" by guaranteeing money market funds that invest in high risk instruments like commercial paper.
Source : The Market Oracle
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