Breaking the Bank of America

 

... and the Asian markets continue to fall. India's stock exchange fell 11% in the first minute of trade this morning (Tuesday, January 22nd, 2008). Trade was automatically suspended for an hour before reopening. (If it falls 15%, there will be another automatic suspension).

So what will happen in the US when markets open? Well it's kinda hard to see them going UP. But on a day this volatile, there will be wild swings, as automatic trading algorithms are triggered to pump out enormous buy and sell orders (remember, some traders are making a ton of money by shorting this market... it falls, they win). So, wildly up and down, but mostly down. A serious opening plunge.

Should be a shambles. I'm guessing US markets will also be automatically suspended for a time today.

Well, Fitch did their best. They gave the US markets three days to come up with a plan. (They downgraded Ambac after the markets closed on Friday, just before the long US holiday weekend for Martin Luther King's birthday.) But what plan can you come up with? There's going to be a lot of forced selling into a falling market.

And there's no fixing the fundamental problem: a lot of the "wealth" created in the past few years, from insanely high house prices to comically complicated and poisonous derivatives rated a perfect AAA, was fairy gold, destined to fade away as we awoke from the dream of unlimited wealth for doing nothing at all.