MELTDOWN IN FINANCIAL SYSTEM

In Jun 08 (see post of 7 Aug 08), I had sensed the worst of the NZ economy and property market is not yet here.

Little did I imagine that the US and UK economies would go into a near meltdown this week (Mon - Wed). If Fannie Mae, Freddie Mac and AIG were not rescued, the impact on the US and the world's financial markets would have been unimaginable because of the knock-on effects.

A report from Wealth Daily I received highlighted that investors in the 25 US financial corporations alone (see below for detailed list) have lost almost a trillion dollars (in market capitalization).

Noting that Fed's bailout of AIG at US$85 or kiwi $129 billion is just under the size of the NZ GDP of NZ$136 billion (NZ Herald 18 Sep 08, pg B1), the US$1 trillion loss (NZ$1.5 trillion) suffered by investors is 11 times the NZ GDP. Wow ... Mind-boggling numbers.

FALL IN MARKET CAPITALIZATION OF 25 US FINANCIAL COMPANIES

Here's a list of the losses in market capitalization for 25 of the biggest financials since their rough peaks in October 2007. (From Wealth Daily of 19 Sep 08)

The losses include:

• A I G -Then: $178.8 billion... Now: $5.46 billion. Down 96.95%
• Bank of America -Then: $236.5 billion... Now: $123.4 billion. Down: 47.82%
• Citigroup -Then: $236.7 billion... Now: $76.34 billion. Down 67.75%
• Merrill Lynch - Then: $63.9 billion... Now: $30.2 billion. Down 52.74%
• Fannie Mae - Then: $64.8 billion... Now: $0.45 billion. Down 99.3%
• Morgan Stanley - Then: $73.1 billion... Now: $41.1 billion. Down 43.78%
• Wachovia - Then: $98.3 billion... Now: $19.44 billion. Down 80.22%
• JP Morgan Chase - Then: $161 billion... Now: $130.2 billion. Down 19.13%
• Capital One Financial - Then: $29.9 billion... Now: $16.9 billion. Down 43.48%
• Washington Mutual - Then: $31.1 billion... Now: $3.64 billion. Down 88.3%
• Lehman Bros. - Then: $34.4 billion... Now: $0.80 billion. Down 97.6%
• Goldman Sachs - Then: 97.7 billion... Now: $40.6 billion. Down 58.7%
• Wells Fargo - Then: $124.1 billion... Now: $111.25 billion. Down 10.35%
• National City - Then: $16.4 billion... Now: $2.8 billion. Down 83%
• Fifth Third Bancorp - Then: $18.8 billion... Now: $7.9 billion. Down 57.6%
• American Express - Then: $74.8 billion... Now: $37.5 billion. Down 49.87%
• Freddie Mac - Then: $41.5 billion... Now: $0.16 billion. Down 58.7%
• Suntrust Banks - Then: $27 billion... Now: $16.07 billion. Down 58.7%
• BB&T - Then: $23.2 billion... Now: $18.4 billion. Down 20.69%
• Marshall & Ilsley - Then: $11.6 billion... Now: $4.48 billion. Down 61.3%
• Keycorp - Then: $13.2 billion... Now: $5.68 billion. Down 56.97%
• Legg Mason— Then: $11.4 billion...Now: $4.96 billion. Down 56.49%
• Comerica— Then: $8.3 billion...Now: $4.74 billion. Down 42.89%
• Countrywide Financial: Then: $11.1 billion...Now: $0.00 billion. Down 100%
• Bear Stearns— Then: $14.8 billion...Now: $ 0.00 billion. Down 100%

Together these 25 companies alone have lost investors in US a total of $992,690,000,000 over the last 12 months... or nearly 1 trillion dollars.