There are so many bad things happening that it is hard to keep track. Here are two of the worst:
1) Lehman’s debt sold at auction on Friday for below 9 cents on the dollar; meaning the owners of the CDS contracts that insure these securities will have to pay more that 91 cents on the dollar to fulfill their obligations. There is speculation that the figure to do so might run as high as $400 billion. Somebody owes a lot of money that they probably don’t have. (This defines the credit crunch in a nutshell.)
2) In a related story, Morgan Stanley and Goldman Sachs both appear to be on the ropes. From CNBC:
“I don’t wish to spread alarm on the line people but the big issue confronting the market is I’m afraid the health and sustainability of Morgan Stanley and Goldman Sachs” Hugh Hendry, Partner and CIO at Eclectica, told CNBC early Friday. “It is unimaginable that they can be allowed to go, I suspect that they will be nationalized at some point today or over the weekend,” he add.
Not much else to say, is there?