October 7, 2007
September 12, 2008
The collapse of so many major financial institutions in the past year, and over the past few days especially, is hard to fathom in its enormity. Sometimes you need a good visual to put things in perspective. The New York Times has an interactive graphic up on its site that pretty much says it all. It shows that $4 trillion has been wiped off the total market capitalization of the U.S. stock market since last October. Of that, nearly $1 trillion is from the decline in the financial sector alone.
Each box in the graphic is proportional to the size of the market capitalization of the biggest financial firms then and now. As you mouse over the squares, you can see how much each value each company lost between October 9, 2007 and September 12, 2008. Here are some of the individual losses by market cap:
Citigroup: $236.7 billion to $97.8 billion.
Bank of America: $236.5 billion to $150.2 billion.
AIG: $179.8 billion to $32.3 billion
Goldman Sachs: $97.7 billion to $61.3 billion
American Express: $74.8 billion to $45 billion.
Morgan Stanley: $73.1 billion to $41.1 billion.
Fannie Mae: $64.8 billion to $700 million.
Merrill Lynch: $63.9 billion to $24.2 billion
Freddie Mac: $41.5 billion to $300 million.
Lehman Brothers: $34.4 billion to $2.5 billion.
Washington Mutual: $31.1 billion to $2.9 billion
It is staggering when you look at it all together, and when you realize that the companies still standing like Bank of America and Citgroup, have seen bigger market cap declines than some of the institutions that have gone under (Lehman Brothers) or that had to be bailed out (Fannie Mae, Freddie Mac). For the estimated 150,000 financial sector employees who have already lost or will lose their jobs this year, the outlook is bleak. (Although, First Round Capital and Union Square Ventures are already openly trying to recruit a select few of them for their portfolio startups—quant jocks are especially welcome).
What are the implications for VC’s and startups past the tightening in funding?
actually, I think for the short run investing in startups is a safer bet. The government is still inflating. All that money has to go somewhere. Its not building houses, the most costly thing most people will ever purchase.
Thats a lot of money freed up to do actual productive things (turns out everyone buying larger houses than they would have otherwise consumed a lot but didn’t really produce anything).
NONE OF THIS MESS WOULD EVEN BE HAPPENING…. if the SEC had been enforcing thier own rules for the last decade or so.. ILLEGAL NAKED SHORTING HAS ALLOWED BROKERS , MARKET MAKERS and HEDGE FUNDS TO BECOME EXTREMELY RICH.. Then when the game FINALLY starts to unravel they hide the loot in “offshore accounts and try to show a big loss and blame it all on the SUB-PRIME crisis… Georgie boy and the bankers pulled off an even bigger scam than daddy did with the savings and loan bailout in 1988/1989.. Thats right do some research.. The Bush Clan strikes again. This time way bigger..
Nice to see Erick understands stocks
Investment banking should be limited to startups, or really new ventures that adds significant value say like iphone(extreme example
). Simply big companies trading in random stocks makes no sense, and they deserve to die. Long live Lehman Bros.
And we’re not done yet. This could go on for a while.
Thanks for the obligatory “it’s not over yet” message.
Wonder how it will affect tech {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/wI4pRgbkb3_th1.jpg”}”title”:{”value”:”Wonder how it will affect tech ”}”videoUri”:{”value”:”http://www.seesmic.com/video/XVOlrqp2XX”}}}
enough jobs for financial folks in tech? {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/q1GoNzavAf_th1.jpg”}”title”:{”value”:”enough jobs for financial folks in tech? ”}”videoUri”:{”value”:”http://www.seesmic.com/video/eMALJYZ6iA”}}}
I think that the markets will really crimp funding for entrepreneurs due to the lack of viable exit opportunities. No company wants to go public in this market, and m&a activity has fallen sharply as corporates seek to preserve capital coupled with the increased cost of financing as financial institutions refuse to lend their balance sheets. My questions is: with VC funds generally encompassing a 10 year period, how must they adjust their strategy to navigate around this rough stretch?
Thanks Americans for ruining world economy (not to mention threatening world peace). Yay!
its fitting that we ddestroy it, since we did a lot to create it.
But all is lost not actually. We must ensure that those who risk capital do so with their own money. When risk is borne by everybody and profits by the few, unwarranted risk will be taken.
This is not a new lesson. The savings and loan crisis in the 80s taught us this also.
But are government does not represent the interests of its constituents, so its not likely to learn. We need to be able to select representatives that care about what we care about, not choose between the false alternatives presented to us by the mainline parties.
time for companies to cash out action ads style
“For a lot of these Internet businesses that don’t take much capital, they’re less affected,” yeah right!
organized crime at its finest. market timing at its finest. racketeering at its finest. this has been an orchestrated event. dont believe the hype of loss. banks monopolists make money both ways. true losers are workers and investors and the tax payers. just in time for a new presidentcy, who could have seen this coming? banks are the greatest caluclated risk takers on the planet. only thing is that this was a calculated Robbery.
ConspiracyLocator.com
It might be a good time to buy a bank.
Last year I sold long on equity and bought long on oil.
Ha. Ha.
Erick,
Speechless. when you start using the word trillion its at a level of magnitude beyond understanding. Was the former economic climate and capital market flows a dream and this is reality? Or this is a nightmare and the past the basis of our new goal to work back towards?
For my kids I hope the latter. It all starts in November! Not sure who , just not this.
It’s scary that its probably not over. If Goldman goes bankrupt I surrender all faith in intuition and that track record is any indicator of future performance!
Totally off topic but does anyone know of a good managed hosting site for complete morons? Sorry mike for using you like this.
these guys are the best, mike even uses them here for TC http://www.mediatemple.net/
Thanks you rock.
I disagree. Media Temple is way over hyped. A virtual server from http://www.servint.com is a much better way to go.
Through all the financial companies collapsing, I see that Bloomberg is still standing pretty on Lexington Ave. in NYC. How could financial markets flush 4 trillion down the drain? That doesn’t sound like too much sense…lol
$4 trillion isn’t totally gone. We have new and upgraded homes, offices and factories built on cheap credit. They won’t just go away, even if cheap credit did encourage a lot of mis-allocation.
Of the value lost, plenty came from foreign investors. Sure, it will hurt us when they decline to invest in future US assets, but given Russian attitudes toward foreign investments, Chinese regulatory volatility, European asset performances and uncertainties elsewhere…. To paraphrase a cynical joke, the US doesn’t have to outrun the bear market, just outrun our competitors.
Wow.. finally, some sense.. Everyone is screaming these assets are “gone” last I heard, when the bank goes bust, all that real estate doesn’t :poof: disappear along with it.. No doubt this is a crisis, but it isn’t Armageddon .. And thanks Phil Gramm!! Way to get those pesky regulations on the swap market removed that paved the way for this.. Douche
(totally unrelated)
Have any of you, I suppose for brand value, Mike, ever considered auctioning tech advice? I mean like a person with the money to pay for it with crazy probably stupid ideas, can buy an hour of your time, purely on money and not brains, to work on an idea? I ask because of the google comic book thing. I wonder what you could get on an ebay auction?
Turns out that cash that dropped in the lap of everybody that owned a house before the bubble had to come from somewhere.
So hows that “bridled exuberance” working out for you guy’s? sarbanes oxley doing the trick?
How’s are those ivy league Phd’s business leaders getting the job done?
It’s just a few bad apples!
Re: whether tech will survive. Of course it will. Creative destruction is not a new thing and it will continue to repeat itself.
Unfortunately, a tight IPO market means lower returns for VC’s which means challenges on funding in the short term, but this is a blip on the radar screen for innovation. It will never be stopped.
As far as the $4T in “losses”. Much of the run-up to 2007 was fueled by unsustainable business models. Failures aside, a correction was necessary.
Combining the amount of leverage in the system with that necessary correction has produced these devastating consequences.
How sad i work for citi…
Another orchestrated coup by the people behind the Fed:
http://video.go...mp;oq=zeitgeist
All the mocking that President Bush of Hugo Chavez and after tonight we are one step closer to Socialism. Yes, AIG will be majority state owned.
…..In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group in exchange for an $85 billion loan, according to people briefed on the negotiations…..
Don’t believe this is the end of it. More bad news is to follow. If you haven’t started diversifying your funds, now is the time. I personally use offshore bank accounts and they have helped me with asset protection and diversification. If you would like to find out how they can help you, feel free to visit my site.
Best,
Frank Miller
http://www.theo...bankaccount.com
What a cool interactive graph? is it difficult to make? what’s so special about it? and why is it on TC?
ay ay ay.. this sucks. especially for those who will be wrapping up their educations soon and heading out into the job markets… such as myself..
The world needs ditch diggers too.
that is big number, we all hope that, any more doesn’t go down
It looks as if it’s going to get worse overnight. No one is sleeping tonight.
Ah but it’s not over yet, wait till after the elections you will see some very serious meltdowns in the financial community continue.
Unbelievable. Wall Street attracts presuambly the smartest minds in Amercan capitalism, and yet they’re once again revealed to be lemming-like superficial jackasses. How many preposterously overly-paid dipshits fell for this subprime mortgage illusion, and staked their companies and livelihoods on securities derived therefrom, without ever making use of the critical thinking skills that their prestigious MBA academies granted them? What a catastrophic waste of capital.
Don’t forget some people got filthy rich from all of this. We’re using our tax dollars to pay for their bad investments and their risky financial management decisions. The lesson learned: it is ok to gamble with other people’s money because the government will bail you out if you happen to go under.
The mess on Wall Street: Four trillion dollars down the drain?
What about the mess in Iraq: One Trillion Dollars downt the drain. Everything is a mess … the auto industry, the credit industry, the housing industry, world politics, american politics? I don’t know what mess is worse or who the combination of messes around the country and the globe will affect world stability.
America is the big mess.
Government has little or no knowledge how to run a private company. The loss will be more.
How about AAPL?
That’s what you SHOULD be covering.
What if you picked a different start date for comparison? Say, 5 years ago? Why October 9, anyway?
I think all industries are about to take a hit. The hard times are still to come…
In my company we decided to go with Free Digital Signage from http://MediaSignage.com to try and boost retail sales as it is VERY slow now days.
Thx for the info on http://www.MediaSignage.com
Will use is as well.
Garry.
Great article. I have my own take on this and issued a press release today. Let me know what you think.
http://www.prle....com/pr/126158/
Jim Paris
Since banks invent the majority of the money without any assets in the first place, is it really that amazing that a hiccup in the economy and everything comes crashing down?
This entire country is running on a big credit margin account, when things are good it works great, but it doesn’t take much to bring it all crashing down!
All of this yet Dictator Bush and his little Mini-Me “McBush” look you in the eye and tell you everything is just hunky dory! LOL< go figure! Can we afford another four years of the Bush REgime? I think not.
Jiff
http://www.anonymize.us.tc
Looking back 20 years from now, it wasn’t the China Olympics that started the Asian century, it was the crash of America’s financial might that shifted the power.
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson
Enjoy your collapsed economy lol
That article is so funny… It’s obvious the who ever wrote it has no idea how financial markets work. The bottom line is we will see a decline in the value of the dollar which means mexicans won’t cross the boarders and we are all be going to work in new zealand/australia/honkong/singapur etc.. People make to much of a big deal out of this. As long as people in america are free to open new enterprise and operate it with out sams interference we will be fine in the long run. Lets take a look at tech industry, market cap in trilions, att/verizon/apple/ms/dell/hp/oracle just to name a few. There will be more industries created in the future as long as gov’t allows us to create them.
Time to move from sell/buy side to build side? Interesting site put up by Josh Koppelman: http://www.leav...oinastartup.com
I am hearing the news that Washington Mutual and Morgan Stanley are on the block. The Indian tech industry has exposure from 28% – 40% to financial services market. Many firms have started laying down people. Many sectors will see a sluggish growth or slump in the near term. It would take atleast 2 years for this to settle down. India’s finance minister has said that Indian financial institutions are insulated from global markets, but I doubt that.
Follow this and more at : http://www.indianomics.com
Ralph, Ron, & Cynthia:
Now they’re planning the crime of the century
Well what will it be?
Read all about their schemes & adventuring
It’s well worth the fee
So roll up and see
How they rape the universe
How they’ve gone from bad to worse
Who are these men* of lust, greed, & glory?
Rip off the masks & let’s see
But that’s not right, oh no, what’s the story?
There’s you & there’s me
That can’t be right
I am amazed at this atrocious decision to bail out wall street ! socialise the losses and privatize the profits ! Why should tax payers foot the bill of wall street bankers ! .
Look at the ridiculous decision to ban short selling in banking stocks ! all this just to shore up the stock prices of failing banks and help them survive.
Is the treasury going to bail out all the businesses ? How about the airline industry and the automobile industry ?
Its a high time we let the bankers face the music! How about getting the bonuses back to fund the bail out !!!!!
America: Where billion dollar bonus’ed CEO’s snicker as the common people pay for the price of their incompetence and folly, where Murderers walk on the account of their celebrity, where Disney kids serve mere minutes after multiple convictions of drunken driving, where high noon mentality rules in the White house, where money talks and justice walks, where the greed of the few always out weighs the needs of the many, where multi million dollar homes are built directly in the path of hurricane rich zones and we all pay the premium cost of that to the insurance companies, and a get rich quick attitude permeates every street corner.
Please take this advice, buy Canadian and only Canadian, get out of the markets and buy gold, sell your American condo’s or time shares while you still can, seek an insurance company not tied to some American boardroom. When this 700 billion dollar bail out blows up in their faces…and it will because the same morons will be running the show, it’ll put this planet in the worse shape it has ever been..God help us all…America… Oh how the mighty have fallen…What the hell happened? It’s just plain pathetic
Schonfeld’s graphic doesn’t actually ((( show + tell ))) what’s happening and how various parties are interconnected in the Credit Crunch 2008 debacle: homeowners, mortgage CDOs, banks, the money markets, US government, wider implications, etc.
This does:
http://www.sqwa...runch_2008.html
Huh?