On 15 September 2008 Lehman Brothers, the giant US investment bank, went bust. This was the moment when global financial stress turned into a full-blown international emergency. But what exactly happened on the day a decade ago? Why did it happen? What were the consequences? And could something similar happen again? What happened? The US government refused to bail out Lehman Brothers, which was finding it impossible to roll over its borrowings in the markets. The Wall Street bank was, instead, allowed to go bust. That failure of a systemically-important financial institution with some $700bn (£538bn) of liabilities created a seismic shock to the entire global financial system. The global money markets froze, and banks and insurance companies in most of the developed world also suddenly found they could not borrow either. The chair of the Federal Reserve (the US’ central bank), Ben Bernanke, subsequently called it “the worst financial crisis in global … [Read more...] about Financial crisis 2008: How Lehman Brothers helped cause ‘the worst financial crisis in history’
Why financial crisis happened in 2008
The memory still haunts many. Facing an incredible $619bn in debt, Lehman Brothers filed for bankruptcy on 15 September 2008. The largest failure in history, it was a defining moment in a global financial crash that was already making its presence felt around the world. On that early autumn day we watched, mesmerised, as the company’s now ex-employees scurried from deceptively robust office buildings clutching the flimsiest of cardboard boxes. Few of us realised then that we were witnessing the epicentre of an economic earthquake whose rubble still threatens to bury us a decade later. As the tenth anniversary of that surreal day rolls around, experts across the financial and business industry have been trying to wrestle hard facts and objective measures from the subjective, politically and socially fraught history of the last ten years. “The financial crisis ... was followed by the deepest recession experienced in the UK, and … [Read more...] about Financial crisis 10 years on: Who are the winners and losers?
Axed over the Christmas break, told to be out by lunchtime after 50 years' loyalty - this is redundancy in New Zealand, where there's no mandatory notice period or compensation payments and little support for those searching for new work, writes Kate Newton. It's mid-winter at the bottom of the southern hemisphere and Jason Welch is wearing jandals, shorts and a t-shirt. He's a big man, with a sleeve tattoo on his right arm, but above him, the shuttered Cadbury factory is a behemoth. It dominates an entire block in Dunedin's low-rise downtown and on this fading winter evening, the four-storey concrete facade, painted the colour of milk, glows orange. As traffic rushes behind him on the one-way heading north, he squints up: "What a waste." For 19 years, Welch was a Cadbury worker, clocking in each afternoon for the evening shift. Starting off on the packing line, over the years he gleaned the skills needed to operate the machinery, which ingested nothing special but, through an alchemic … [Read more...] about Big read: Why being made redundant in NZ is so tough
Investors have tended to steer clear of the UK’s big banks since the financial crisis bit in 2008, when share prices plummeted and Lloyds and Royal Bank of Scotland (RBS) had to be bailed out with taxpayer money. As we tend to do, on our Value Perspective blog, we took a different view – arguing things were not quite so dire for the sector and, ever so slowly, the wider market appears to be coming round to that view. We are constantly revisiting and testing our investment thinking, however, and – with the ‘big four’ of Barclays, HSBC, Lloyds and RBS all publishing their company results for 2016 over the last few weeks – have just finished carrying out just such an exercise with the banks. From that, we have produced three simple charts illustrating why we believe the risk-reward trade-off for the sector continues to look attractive. Our first chart compares the total assets of the big four as they stand now with how they were in 2007. It does the … [Read more...] about Three charts showing why we remain very happy to hold UK banks
The whole economy fell to pieces all at once. The enormity of Russia’s financial collapse on Aug. 17, 1998 only really hit home with me the next day. “We are so f-cked,” George Kogan, one of Moscow’s most famous and longest serving equity salesman, explained to me standing in the apartment of Simon Dunlop, one of Moscow’s most famous entrepreneurs. “The whole system has just crashed. It will take years for Russia to recover.”Moscow had been a party town for the two preceding years. The pain of Prime Minister Yegor Gaidar’s shock therapy was finally beginning to fade. The ruble had been a stable RUB6 to the dollar for nearly a year. Inflation was creeping downwards and was in the teens, as were the interest rates on the government’s GKO treasury bills. The expats in Moscow were in a tizzy following a stock market boom, where the Russian Trading System (RTS) had risen from its 1996 inaugural starting point of 100 to over 500 by … [Read more...] about Remembering Russia’s 1998 Financial Crisis (Op-ed)