Subprime Mortgage Meltdown Goes Global- Dow Plummets

The subprime mortgage meltdown which started with US Bear Stearns two multi-billion dollar hedge funds going under is now spreading across the pond to Europe where French bank BNP Paribas froze three similar funds (total market value about $3.79 billion) invested in US subprime mortgages sending the Dow down 200 points according to the AP wire.

This prompted the European Central Bank to pour in $130 Billion (the largest in history) in overnight funds to hopefully stave off a panic. Our own central bank, the Federal Reserve, followed suit pumping in $24 Billion to the US banking system.

Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., added:

“This is a mini-panic,” he said. “All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer.”

MarketWatch.com reports at least one “large hedge fund or investment bank is liquidating massive trading portfolios” and this liquidation is the catalyst for dropping values even in funds not invested in subprime mortgages.

“Clearly, something is amiss in the markets that few in our strategy, if anyone, have experienced before,” Black Mesa reported to MarketWatch.com

It’s my guess this “investment bank” is Goldman Sachs since less than an hour ago, Reuters reported their hedge fund, the Goldman Sachs Group (GS.N fund) was selling off in a big way.

President Bush held a press conference today in my estimation to sqwash a panic in our markets and to discuss American home owners’ plight who took out these subprime mortgages. Fox News reported the President dismissed any tax payer bail out saying,

“The word bailout - I’m not exactly sure what you mean. If you mean direct grants to homeowners, the answer would be no”

As I predicted months ago, the subprime meltdown would not be contained and would effect the financial markets as well as the real estate markets is now coming to fruition.

I hate to say “I told you so”…but I told you so.

Take cover!

Hold on to your hat, this ride has only just begun!

Good Luck…we’re all going to need it.

Author: Rob K. Blake
Published August 9, 2007