Flight to quality is about the only thing I can say for sure about the ongoing Wall Street crisis that swallowed up a 158-year-old investment bank and forced Merrill (no-relation) Lynch to be sold to some outfit in North Carolina. (The $613+ billion that Lehman lists as debt is between the 2007 GDP of Belgium, $448 billion, and Turkey, $657 billion, the 17th and 18th largest economies in the world.)
Stock up on Swiss francs and hope that your European institution didn’t load up on specialty vehicles backed by US property bonds. The Washington Post calls it the beginning of a new financial architecture, and it’s getting built on the fly, without blueprints, at a speed that the builders hope will be faster than the collapse of the old one. Good luck with that.
Given the trouble that UBS has in the US at the moment – legal as well as financial – I’m not sure that Swiss assets are necessarily the way to go.
The titans of Wall Street have, over the past 72 hours, been forced to reckon with the reality that the financial sector they built is, in its current form, too big, uses too much borrowed money and creates too much risk for the broader economy.
Haven’t we heard this before?
Re: building of the new infrastructure, I’m not sure the shutting down of a few (although major) financial institutions will help sustain the pressure for increased regulation. From a rational point of view, it is in everyone’s interest, but it may be resisted after the initial panic subsides.
Oh yea, UBS down another 14 per cent yesterday. Not such a good deal.
Not Good. The other rings in this three ring financial circus always feel stress when the center pole of Center Ring shakes, shimmers and leans. Occupants flee from such markets. The Asian Ring is down as is the European Ring. Ouch.
Maybe the good old US custom of burying silver or gold coins in the back yard will return to popularity to avoid the financial institutions!