100x125 gabrielyapHi All, 

Seems that Financial Melt-down had been avoided as we gear up to analyse the details in the upcoming US$700 bln rescue plan this week.  Not surprisingly, events last week simply took our breath away, suffocating some of us as a matter of fact - it was really unprecedented! 

Who was at fault ?? Regulators, CEOs of financial companies or shortsellers?? When the light comes out, some would appear naked for sure.   

Nonetheless, it is noteworthy that  up until 2003, all investment banks were allowed only 12 to 1 leverage. Then in 2004, the SEC basically gave five banks (and only five banks) the ability to lever up 30 or even 40 to 1. Bet you can guess the five banks. Bear, Lehman, Merrill, Morgan and Goldman. Three went down. 

Ma ma mia, hopefully we will get a much better regulatory scheme which requires much reduced leverage coupled with a fine balance of risk taking. 

Will these measures and amount be sufficient to ride over these "total losses"?? 

It is going to cost the taxpayers a lot of money. While I think the losses on AIG will be rather minor in the grand scheme of things, if you add up Fannie and Freddie and a new RTC, coupled with the stimulus package, you can easily get to $500 bln.  The amount for the rescue is US$700 bln.  The true actual cost would be the total direct costs less the recovery value of the loans 2/3 years down the road.   

In the last RTC (
Resolution Trust Corp)
rescue of the S&L crisis in 1989, the RTC took over US$400 bln worth of loans n recovered a total of US$325 bln before it was dissolved.  So, the amount is not going to be so high if seen in the light of a sufficient period of time.  But as we all know, when things and markets move like lightning, we would be frozen by lightning n force to sing "Chiquiquitta, tell me what's wrong? U in pain by u own sorrows (if geared)" 

At the end of this week, when I do meet some of you at the F1, I hope to be able to sing "I have a dream, a song to sing; u help me through, reality; Have u see the wonder, of the fairy tale? I can see the future ....." 

Cheers n Stay Happy,
'Angel' Gabriel

(Gabriel is senior dealing director with DMG & Partners, and appears frequently on international TV, radio and print media.)

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings2.3600.060
Avi-Tech Electronics0.260-0.005
Best World1.7300.030
Broadway Ind0.095-0.001
China Sunsine0.390-
Delfi Limited0.9450.015
Food Empire1.400-0.020
Fortress Minerals0.260-0.020
Geo Energy Res0.355-0.005
GSS Energy0.027-
Hong Leong Finance2.4800.010
Hongkong Land (USD)3.080-0.070
ISDN Holdings0.315-0.005
IX Biopharma0.0460.005
Jiutian Chemical0.024-
KSH Holdings0.250-
Leader Env0.050-
Medtecs Intl0.1320.001
Nordic Group0.335-
Oxley Holdings0.0910.001
REX International0.139-0.007
Sinostar PEC0.125-0.010
Southern Alliance Mining0.600-
Straco Corp.0.500-
Sunpower Group0.220-
The Trendlines0.085-
Totm Technologies0.0220.001
Uni-Asia Group0.800-0.015
Wilmar Intl3.330-0.030
Yangzijiang Shipbldg1.7900.010

We have 1929 guests and no members online

rss_2 NextInsight - Latest News