Sunday, October 12, 2008

It's been awhile....

Well, it's been awhile since I have posted. Life has been chaotic to say the least mostly due to work. I have been working until 10pm or later most every day starting 9-28 due to quarter end and the current market situation.

Starting the first week of September or so, the US financial markets began a downhill spiral. It all started last year or even earlier with the subprime mortgage market starting to boom. These subprime mortgages had adjustable rates or no principal due clauses that eventually became unaffordable to many home owners, therefore, causing foreclosures and bankruptcy. Since many of these mortgages were sold to the secondary market to large investment banks and counterparties and even Fannie Mae and Freddie Mac, the declining economy had far reaching effects on these large entities that seemed too stable and dependable to fail prior to these financial times. Soon the failure of these investment banks started. The government stepping in to save Bear Stearns and allowing a buyout was the first indication, next came Fannie Mae and Freddie Mac, next was the failure of Lehman Brothers, and finally, the buyout of Merill Lynch by Bank of America. Now there are really no investment banks and only 3 of 5 of the largest banking firms remain. (Morgan Stanley, JP Morgan Chase, and Goldman Sachs)

The insurance sector is in trouble as well as the financial sector. AIG had to borrow $20 billion of its own reserves and borrow an additional $85 billion from the US government. Next, Washington Mutual fails and Wells Fargo buys Wachovia.

Here is a link to the timeline:

What does this mean to me and my job and life?

1) Aviva has many investments in Lehman and Lehman sold derivatives and structured bonds. These are now only valued at $.34 on the dollar, and I spent several days processing write-downs, deleting receivables, and checking and re-checking pricing before we closed the books.

2) The liquidity markets are also closing down, so the Aviva cash dept. had to get creative in order to invest its cash at quarter end in money markets.

3) The credit markets are closing as well, so as we had to record losses in Aviva's investments due to Lehman holdings and general poor market conditions, we received capital from our parent to keep our capital reserve levels up. ( I am very thankful that we have a UK parent with conditions in US markets the way they were at quarter end!)

4) No matter how prepared we were for quarter end, these and other crazy things seemed to come out of the woodwork.

5) Finally, I don't even want to look at my 401 K balance. I am sure I would be sick!!!

I have never seen the government need to step in to the private financial sector so much in my lifetime, but I am sure we will be stronger for it when the dust settles. Hopefully, we have a few strong financial institutions when all is said and done rather than many, many mediocre ones. Hopefully, we will learn from our mistakes of the subprime investments and a market like that will not exist again. Hopefully, our government will actually make money on the loans and investments it has made. Most of all, hopefully, the economy will soon begin taking care of itself again and confidence and strength will return.

Pray with me for our leaders and those citizens most affected by this financial crisis to make the right decisions and get through this crisis quickly!


Kristina said...

I won't look at my Thrift Saving Plan through the government either. Hopefully with the 9 years I have left, it will rebound.

Mary Perry said...

I made Don promise not to look at his statement. It is so freaking sick, very scary times.

I think of you every day and know that this has to be horrid for you, work wise.

Love you and extra big, non-alcoholic hugs

janalee said...

:) Gina, keep your chin up. 97% of the 5-year periods in the stock market have made money. 100% of the 10-year periods have made money. It'll be okay.
I'm still praying for our leaders, though ;).

Cheri said...

Thinking of you, Gina...I am trying to ignore the problems, hoping my 401K has plenty of time and then some to recover. You, on the other hand, are in the thick of it with your job. *hugs*

Joellyn said...

Gina, I can't imagine how stressful it is for you given what your job is, to daily watch what the stock market has been doing. It's stressful enough to watch from home! Anyway I'm thinking of you and saying a prayer or two!