Good news for cardboard box manufacturers today as more shares plummeted in value because of poor financial decisions. I notice HBOS was off by 22% by close of business.
The latest spirals link to the AIG underwriting of $300bn of ropey bank business but its just after Lehman Brothers declaratiion of bankruptcy and Fanny Mae's earlier splash. The US Government is bemused now too, because whilst they loaned money to bail Fanny and Freddy, by the time they got to Lehman and AIG, the view of what a discounted dollar looked like was getting too hard to understand.
The Bank for International Settlements keeps a track of the amount of derivative based debt which hovers around the $600 trillion level. One of the factors in this counterparty risk based business is that the value of each contract depends on the solvency and ability of participants to honour their obligations. Not a lot of bankers appear to know that judging from recent events.
So AIG's write down of a dollar was to somewhere in the 60cent range and Lehman's was right down to 30 or so cents. Some might call these levels meltdown.
It certainly means that all the opportunistically commissioned missing money first being talked about a few months ago is now collecting into ever larger debt puddles and pools. I suppose we are still mainly talking in billions and haven't really got started on the trillions yet.
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