SEA Of RED - 2008 Markets Year In Review

It would be a MASSive understatement to describe 2008 as just a 'tough' year for the GLOBAL Financial Markets and Financial Services Industry. Many are going further than that and are already referring to 2008 as the most difficult and trying U.S. market environment since The Great Depression of the 1930's. Rigorous academic discourse and hyperbole aside, here are some eye-opening STATS courtesy of Bloomberg to tie a ribbon on things + put the 2008 GLOBAL financial FALLout in some perspective :


* Global stock markets lost about 1/2 of their value in 2008, or $30.1 TRILLION !


* In the U.S., $7.2 TRILLION of shareholder value was wiped off the books, as the Standard & Poor’s 500 Index fell 39% through Dec. 30 and the Nasdaq dropped 42%


* The Amex Securities Brokers/Dealers Index (fyi, the Broker/Dealer Index is comprised of 12 of the most widely known firms in the brokerage sector...the ticker is XBD) hit a high of 267.69 on June 1, 2007...as of Dec. 30, 2008, the index stood at 74.26 (down 72%!)


* The wave of writedowns and losses that swamped financial institutions around the world reached $720 Billion this year.


* During 2008, the global financial-services industry announced 220,360 JOB CUTS.


* According to the FDIC, there were 25 Bank FAILURES in 2008, the most in 15 years.


* Lehman Brothers (the artist formerly known as LEH)., with assets of $639 Billion, filed the LARGEST bankruptcy in U.S. history on September 15th, 2008...its creditors may have lost as much as $75 Billion, the firm’s chief restructuring officer said.


* In the Largest U.S. bank failure in history, Seattle-based Washington Mutual (the artist formerly known as WM) collapsed in September with approx $307 Billion in assets.


* New York-based Citigroup Inc. (C), whose shares lost 78% of their value this year, needed $20 Billion in U.S. bailout funds in November on top of an earlier $25 Billion infusion of capital. The government was also forced to guarantee $306 Billion of the bank’s troubled assets.


* The U.S. government was forced to rescue the WORLD's LARGEST insurance company, American International Group (AIG), with a $152.5 Billion package of investments, loans and capital infusions

* General Motors (GM) and Chrysler LLC will get $13.4 Billion in federal loans to stay afloat until President-elect Barack Obama’s administration can devise a rescue plan of its own.


* Overall, the U.S. Federal Government has committed $8.5 TRILLION of stimulus in 2008 in order to jumpstart the U.S. economy


* Global merger activity fell to $2.5 TRILLION in deals announced in 2008 vs. the record 4.1 TRILLION worth of deals announced in 2007 (down 39%)


* Hedge funds lost 18% of their value for the year through November, the worst year since record-keeping began in 1990, according to Chicago-based Hedge Fund Research Inc. Morgan Stanley estimated that, by year end, at least 620 hedge funds will have closed.


* According to Investment Company Institute, a Washington-based firm, individual investors pulled $215.7 Billion from stock market mutual funds during the first 11 months of 2008...this compares to a net inflow of $91 Billion during the same period in 2007



bloomberg.com/apps/news?pid=20601109&sid=ataVotdLreS0



Data Courtesy: Bloomberg

Will President Obama Rescue Chrysler ?

In a recent decision that will surely carry heavy implications for the entire U.S. automobile industry, the Bush administration will NOT be providing additional taxpayer funds (in the tune of approx $8-$10 Billion) to back a Chrysler-General Motors (GM) merger. With that said, it'll be interesting to see in January '09 if a Barack Obama White House administration chooses to reverse stance on this issue and in effect, rescue the smaller Chrysler from insolvency.

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Per the below Yahoo Finance article, some interesting Auto Industry related EMPLOYMENT figures that deserve attention:

* 355,000 Americans are directly employed by GM, Chrysler, and Ford

* 4.5 million Americans work in sectors supported by the auto industry

* Over 2 million Americans received healthcare benefits from the "Big 3" (GM, Ford and Chrysler)

* 775,000 retirees and their survivors receive pension payments from the industry

yahoo.com/tech-ticker/article/104817/Paulson-to-GM-Chrysler


Data Courtesy: Yahoo Finance

Big 3 EMPLOYMENT - Ford, GM and Chrysler

Given the country's ongoing recession, I decided to look into how much of a RISK to overall EMPLOYMENT numbers (payrolls) it'd be if any or all of the U.S.'s 'Big 3' Auto Manufacturers were to go under/declare BANKRUPTCY. While I have trouble envisioning a scenario in which ALL 3 U.S. major automobile manufacturing companies are 'allowed' to FAIL (I believe the government will step in at some point and most likely arrange/force a merger of at least 2 of the 3 companies to prevent a massive loss of JOBS), I do believe there's a solid chance of seeing AT LEAST one company go under before the current recession runs its course.

Regardless of WHO goes under, given the amount of JOBS each of these companies are directly responsible for (and don't forget about each of their major auto parts supplier relationships...job losses will unfortunately be felt 'indirectly' on that end as well if any of the Big 3 fail), when one of these entities eventually collapses, the ramifications to the U.S. (and of course Michigan as all 3 of these companies are headquartered in Michigan) economy will most certainly be negative (I think I just set THE record for most commas in a run-on sentence).

* According to Hoovers and year end 2007 data :

1.) General Motors (GM)
2007 Employees: 266,000
2007 Sales: $181 Billion
2007 Profit (Loss): negative $39 Billion

2.) Ford Motor (F)
2007 Employees: 246,000
2007 Sales: $173 Billion
2007 Profit (Loss): negative $3 Billion

3.) Chrysler (private company)
2007 Employees: 72,000
2007 Sales: $49 Billion
2007 Profit (Loss): N/A




Data Courtesy: Hoovers