Financial Crisis - More to come

The Lehman Brothers Auction that I spoke of yesterday took place today and the strike price on their debt instrument investments (COD) sold for 9.75 cents on the dollar. That means those who wrote the Credit Swaps (Insurance) owes the investors 90.25 cents on the dollar. Some assets have been sold over the past months in preparation for this and more assets will have to be sold to cover these shortages (estimated to be $60 trillion) or the writers of the swaps will go under or the investors will be left holding the empty bag. In all cases some money will have to be raised, assets sold, which will put more selling pressure on the stock market. Thus look for the markets to go lower next week. The long and short is that the $10 million package of mortgages that we spoke of yesterday is now valued at $975,000. I believe that this will cause more banks and brokerage firms to fail in the next few weeks. It will take a month or two for the dust to settle, ie… banks to close doors, the government to implement their $700 billion rescue package, and global governments to initiate a coordinated effort (this weekends G7 meeting). From there the market will have to build confidence and as it builds the market will rally. I will be putting my money in commodities, oil, coal, agribusiness, natural gas: these are things that you and I will continue to be purchased at some level as the economy regains strength. I don’t have to buy cars, heavy equipment, computers, software, or houses so I’ll stay away from consumer discretionaries. I’ll also stay away from financials; a year from now the financial industry will look very different then it dose today. I don’t know how but I don’t want to get caught in the effects of heightened government regulation which usually translates to less risk and less profits thus lower value. The world is not coming to an end, the sun will rise tomorrow, and we will get through this and come out of this crisis on the other side better then we entered. I’ll keep posting until I don’t have an opinion.