Let’s Hear it for Financial Armageddon

Some people thought I was crazy with my prediction back at the beginning of this year that we would see a crisis that would look like financial armageddon. But if you take a look at that article, my predictions (while not great) do capture the essence of what has happened. While I was wrong in predicting the demise of all the bond insurers and not the broker/dealers, I did make a couple good predictions:

June: Several regional banks based in California are paralyzed by bank runs. They declare bankruptcy. The FDIC estimates that the bailout of their depositors will cost $30 billion.

September: A large insurer reveals write downs due to mortgage-backed security losses equal to its book value. Its stock drops 90% in one day, leading the S&P 500 down 8%.

It is pretty eerie that my prediction of an insurer’s troubles corresponds closely to what has happened to AIG [[aig]]. These are scary times, but the worst is not over. Expect more bank troubles, including the failure of Wamu [[wm]] and maybe National City [[ncc]].

Bert & Ernie sing “Ante Up” by M.O.P.

Disclosure: I have no position in any company mentioned. I do have a friend who works at AIG. I have bank accounts and a mortgage at National City.

Leave a Reply

Your email address will not be published. Required fields are marked *

Please complete the formula below to prove that you are human * Time limit is exhausted. Please reload CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.