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Tag Archive: Financial crisis of 2007–2008


September 15 2008 was one of the most extraordinary days in global financial history.A simmering credit crisis exploded into a full-blown apocalypse in the global financial sector when Lehman Brothers filed for bankruptcy.  

With assets of $639bn and a further $613bn of debts, it was the biggest corporate bankruptcy in the US. The collapse of Lehman had immediate repercussions, frightening financial markets around the world, but with hindsight its demise has come to embody the failure of investment banks to adequately assess risk and invest accordingly.

Market Performance (from the close before Lehman BK) – Silver +71%, Gold +61%, S&P +58% ( For S&P the dividend are not accounted for. Including dividend it will be close to 88%)

Here is a must watch documentary of 60 min : “The West is done, it’s over! We screwed it all up. Do you want your great-grandchildren speaking Chinese 🙂

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History shows that mutual fund investors generally increase inflows after observing periods of strong performance. They buy at bloghigh prices when future expected returns are lower, and they sell after observing periods of poor performance when future expected returns are now higher.

This results in what author Carl Richards called the “behavior gap,” in which investor returns are well below the returns of the funds in which they invest. Perhaps with this observation in mind, Warren Buffett once said, “The most important quality for an investor is temperament, not intellect.”  Continue reading

Equity markets (specifically the market for large capitalization stocks) seem to be very different from other markets in that they areblog the only markets that are unconditionally liquid. The Basel Committee has officially recognized this – in their classification of 24 markets by liquidity horizons, the large cap equity market is the only market in the most liquid bucket. (Basel Committee on Banking Supervision, Fundamental review of the trading book: A revised market risk framework, Second Consultative Document, October 2013, Table 2, page 16)

There is abundant anecdotal evidence for the greater liquidity of large cap equity markets in stressed conditions – you may not like the price but you would not have any occasion to complain about the volume. For example, in India when the fraud in Satyam was revealed, Continue reading

History shows that mutual fund investors generally increase inflows after observing periods of strong performance. They buy at bloghigh prices when future expected returns are lower, and they sell after observing periods of poor performance when future expected returns are now higher.

This results in what author Carl Richards called the “behavior gap,” in which investor returns are well below the returns of the funds in which they invest. Perhaps with this observation in mind, Warren Buffett once said, “The most important quality for an investor is temperament, not intellect.”

In his wonderful book “The Behavior Gap,” Richards recommends asking three questions before you make investment decisions based on your own or someone else’s forecast:  Continue reading

On 15th September 2008, Lehman Brothers declared itself bankrupt. The blog was relatively new,In one of the most dramatic events of the 8135302007-2008 global financial crisis, the 160-year old institution collapsed due to its exposure to subprime mortgages. After Lehman’s failure, financial markets entered a period of unprecedented volatility and governments spent trillions of dollars attempting to restore confidence in the banking industry. Five years on, how has the banking industry landscape changed?

On the one hand, the risk of another Lehman-style collapse has been reduced because banks are better capitalised than they were before the crisis. For UK banks, for example, Tier 1 capital was 8% of risk-weighted assets in 2008; by 2012 this had risen to 13%. In addition, the market infrastructure is being strengthened by the introduction of central counterparties, Continue reading

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