Massive Sell-off Monday? Morgan admits to bank run.
by bobswern, Mon Oct 27, 2008 at 01:03:27 AM EDT
Early news from the international markets is not good this morning. The Hang Seng (Hong Kong) index is down a whopping 13% as I write this, and many other Asian exchanges are doing almost as poorly as the Yen increases in value amid volatile trading. U.S. index futures are down significant amounts, in part, as a result of this. Looks like it's going to be another roller coaster of a day here in the U.S., with European trading indicating major market declines there, as well. Read about it here: "Global Stocks, U.S. Futures Drop on Economy; UBS, Deutsche Fall."
For those wondering why Treasury Secretary Paulson and Federal Reserve Chairman Bernanke were so quick to allow Goldman Sachs and Morgan Stanley to morph into banks a month ago, the reasons are now becoming apparent, at least in Morgan's case: 1/3 of all of the money in its money market accounts were withdrawn in an investor run as we're now learning via Bloomberg.com this morning. Read about that right here: "Morgan Stanley Propped Up Money-Market Funds With $23 Billion."
Now, I don't know about you folks, but I'm hearing stories of major retailers dropping like flies (last week it was Circuit City), and this is all going to contribute to the downward spiral in demand for goods and services.
But, perhaps what concerns me most is how this hits home within everyone's community here in the U.S. This past week, my local town government cancelled efforts to obtain badly-needed playing field space for our local high school athletic teams, after making the determination that a bond offering to raise the money was no longer appropriate. This inability to find buyers in the bond market now is affecting just about every government in the U.S. The same holds true in the Corporate bond market, as well, where GE just announced late last week that they're going to have to borrow from government funds just to support their cashflow requirements.
Yes, it does appear that things are going to get significantly worse, and for quite awhile, before we see any improvement.