The Playing Field is Constantly Changing

I started writing the below text on Tuesday and then things got more exciting, the government loaned AIG 85 billion dollars for 80% of the company.

People have lots billions and billions of dollars. The market in general is now worried about the next shoe to drop. People are not sure if Goldman Sachs or Morgan Stanly might end up getting sold or going out of business.

The landscape keeps changing and lots of companies will be extinct.

Huge leverage will not be allowed anymore. There will likely be even more government regulation and many people will suffer. Many already are and it is sad.

I remember the crash of 87 and how exciting it was to be short and make money, and then I woke up the next day worried for America. As a Country we made it through that, this will be much harder

My original beginning went:

On Sunday it was clear that Monday would be an interesting day, Bank of America was buying Merrill Lynch not Lehman and Barclays also walked away from Lehman. Lehman has filed for bankruptcy.

AIG is having liquidity problems and between Lehman and AIG the market collapsed 500 points on Monday.

It seems as though people are waiting to see what will happen with the actual financial instruments not just the stock and companies that bought them. A lot of people will be losing their jobs and it is really a sad state of affairs. This will bring more financial oversight and more regulation.

Additionally the banking troubles are not over. AIG may get bailed out but the cost to share holders has still been huge. AIG is so large the ramifications of this company going bankrupt or something like it is unknown.

So, I have been asked how the insurance and mortgage fields break-down might affect what I do in the short market.

The insurance companies are part of a larger group called financials which would include the brokerage firms, banks, saving and loans and other things.