Bleak Outlook in World Financial Markets

Latest: Lehman Brothers files for bankruptcy - 5 hours after I started this post. At the same time, an equally shocking news - Bank of America has agreed to buy troubled investment bank Merill Lynch for $50bn.

This is quite sad to read

Lehman's dying hours

Keeping track of AIG's price
Last traded $7.12 only at 10.12AM EST

The latest news on Lehman Brothers and AIG are really worrying. Looks like the subprime mortgage crisis is going to claim a few more scalps.

Rumours have been spreading that Lehman Brothers, a 150-year old financial services firm, mainly in investment banking, has been on life support for the past few months and finally the company is not able to contain all the bad news from reaching the market. Despite putting the company up for sale, so far no companies have been willing to reach into their pockets. Looks like Lehman Brothers is going to go down the path of Bear Stearns.

Meanwhile, the holding company of my employer - AIG has also been having a bad time in recent months. It's share price has plunged from $70 around one year ago to a low of $11 as of last week. It is the only insurance company to suffer top 10 losses from the subprime crisis thus far, due to its large CDO exposure. AIG needs to shore up its balance sheet in light of the huge losses it has suffered in the last 3 quarters and is facing a possible credit downgrade by rating agencies. Any credit downgrading is likely to add on a lot more pressure to the company.



Testing times ahead for the financial markets...