Tyler's Tidbits

On the economy

By: Tyler Will

Posted: 9/17/08

09/17/08 - Previously, and not too long ago, I said in a Facebook note that the economy wasn't facing tough times, it was only tougher than it used to be.

And this is 100 percent true. Times today are tougher than they used to be, but I have since changed my mind on the economic situation, and I will candidly provide my verdict: the financial community is facing a catastrophe. Around the country, people will be looking in their retirement portfolios and college funds only to see a massive slump in available funds.

On Sunday, the formerly $639 billion equity firm Lehman Brothers filed for bankruptcy protection, the largest of such filings in U.S. history. This tops the bankruptcy filing of WorldCom, which was only worth $107 billion in 2002.

Lehman Brothers' stock fell 94 percent in Monday's trading, and are trading at about 15 cents per share, which was about $48 per share only a year ago. The news so shocked the financial world that markets in the United Kingdom, France and Germany also experienced sharp decreases of about 4 percent, which is on par with the NYSE's 4.4 percent slump on Monday.

One of the world's largest insurers, American International Group, Inc., or AIG for short, is in serious fiscal trouble and desperately hunting for cash, while that company's shares have dropped significantly as well, trading at about $2 a share, when they were more than $70 a share a year ago.

If you're a gambler, buy 200 shares of AIG right now. Things couldn't get much worse for the business, and if the price of the stock rises even by a dollar in the coming months, you'll have a 50 percent return on your investment.

As for Lehman Brothers, not one of their top 10 creditors is American. Instead, many Japanese banks will find themselves scrambling for money. But this brings up another problem. The fact that none of Lehman Brothers' top 10 creditors are foreign is not uncommon.

As the gloomy economic situation continues to worsen in the United States, the financial nightmare of many American companies will be echoed and felt around the world, due to an increasingly globalized economy. Chinese businessmen who have purchased U.S. Savings Bonds may find themselves receiving lower interest rates.

Though I have little sympathy for the executives at Lehman Brothers, my condolences are extended to the employees, who were hounded by reporters from television stations and newspapers in New York.

The photograph shot by an AP photographer of a Lehman Brothers broker standing at his window with a look of stark depression on his face should never have been run. And readers of the New York Times will see that Laura Caputo, a financial job recruiter, is not mindful of other peoples' plights.

She was photographed by the New York Times while handing out her card to the grief stricken Lehman Brothers workers, with a gaping smile on her face.

I have problems with people who do such a thing, and I think any compassionate human being would agree.