Europe Markets are Shattered

Yes, I would usually not use such a “scaremonger” title – but I think that these are really the only words that can describe Europes market performance so far today. It is indeed a very, “black” Friday. The FTSE has fallen by more than 8% today after the huge plunges witnessed in Australia and Asia. Amazingly, Japan was down almost 10% – yes, 10% – as investors shrugged off efforts to unlock credit markets and try and restore some confidence to shattered market positions.

At 11:30am, the FTSE 100 was down more than 350 points to fall below the psychological barrier of 4,000 points – the first time in more than 5 years that the FTSE has fallen below this level. Five years !!! This takes the FTSE all the way back to levels not witnessed since 2003 when the market was only starting to recover after the turmoil that was the “Dot-Com Bust”. But I will stop there, as to even compare the dot-com crash to the market turmoil would be “dream” in its analysis.

Another huge thing to pay attention to in the markets coming into next week is the auction to settle credit default swaps protecting the debts from the Lehman Brothers fall out. How Much ? A whopping $400 billion worth of credit default swap contracts in the $55 trillion dollar settlement of contracts market.

It’s even gotten to the point where Barclays Bank is considering raising capital and pursuing other options to strengthen its balance sheet. I can hear you saying already “raise capital in this market? WTF?” – the logical answer is probably “What choice do they have?” . It’s a do or die market at the moment. You aren’t going to get credit from banks cheaply with the sharp increases in the LIBOR rate, and you need cash to survive ? If no ones lending it – offer cheap stock on the down low, and hope that existing investors will jump at the opportunity.

Ah yes, hindsight is an amazing thing. I think at this point in this article a quote would be appropriate. I refer to Denis Waitley:

You must learn from your past mistakes, but not lean on your past successes.

Ah, Denis – what a clever man you are. Unfortunately, human kind cant seem to learn from the mistakes of the past. We don’t learn them from war, and now it seems – we don’t learn them either in the financial markets. The downturn of the dot-com boom and all other financial crashes has been due to a huge number of things – but I put them down to 2 and 2 only.

Excessive and Uncontrollable Risk Taking and Poor Regulation.

Fix this, and then apply Denis’ quote – and hope that we never see the same fall out that we are seeing in this day and age.