http://www.independent.co.uk/news/business/news/crash-shares-tumble-as-lehman-brothers-collapses-and-fears-grow-for-aig-931981.html
Summary:
This article is about the global banking crisis is becoming out of control and one of the world's biggest insurance companies, AIG, is pleading $40 billion in U.S government help to stave its collapse. In addition, it reported that the reshape of the financial industry due to the collapse of the Lehman brothers and the fire sale of Merrill Lynch by the bank of America, is causing panic selling on the stock market. Likewise, the Dow Jones Industrial Average of leading US shares ended down over 500 points, setting up for another weak opening in London this morning. Lastly, it reported that many economists fear that the global economy could be sent into a deep recession, if without a resolution soon.
Connections:
The connection between this article and chapter 1 to me is the importance of shareholders and potential investor. The U.S shares ended down 500 points due to the shareholders have recognized the differences between the current share price as it is reflected on the stock exchange and the original price that they paid for the shares, and eventually started the panic selling. On the other hand, as the potential investors get the news of the panic selling that is currently happening on the stock exchange, they would think that the company is heading to the wrong direction which wouldn’t help them to earn money and would have decided not to invest the company.
Reflections:
After I read this article, I realized that the shareholders and potential investors’ confidence for the company is really reflected on the stock market. As the U.S shares threatened the investors, the panic selling started right away and yet this also affected one of the world’s biggest insurance company, AIG, since everyone is scared of the shares that they bought will not be increased or as the same value as their original price and everyone is now selling their shares which leads to the shortage of cash flow. And now, I think AIG will not be able to receive help from other banks which they are experiencing the banking crisis too, unless it receives further help from the U.S government otherwise I think it might fall to the same situation as the Lehman brothers’ cooperation did.
