Source: WSJ & Reuters

I wish we could say that Lehman’s bankruptcy signals the nearing end of the crisis, but unfortunately it looks more like just another casualty to fall by the wayside. Merrill’s pending acquisition by BofA reinforces the market sentiment that the financial markets are changing for the worse, with no easy solution in sight.

In our firm’s meeting this morning, the mood was somber– several of the older bankers started their careers at Lehman and were reminiscing about the downfall of the institution.  A senior advisor (who’s been in banking since the 60s!) gave us his perspective on the situation.  Here are the key takeaways:

Housing has yet to fall another 20%.  Until we see that drop, the subprime situation will continue to be a drag on the markets.

The derivative situation is highly complex and presents yet another puzzle for the industry to untangle.

FDIC insurance coverage will only account for about 1/3rd of the money in accounts out there now… make sure your assets are covered and within the $100k limit per account.

We rely upon the continued influx of foreign money to keep our economy afloat.  Paulson’s first action in the Fannie/Freddie bailout was to assure the Chinese that the debt is good; basically if all the overseas investors pulled out, we’d be toast.

Hedge funds are deleveraging now at a rapid pace; many have put a freeze on new investments and are bunkering down for a long winter.

I believe events happen for a reason, even if it is not immediately obvious to us.  In hindsight, my decision to go to an entrepreneurial boutique with a better match for my healthcare background has saved me from being put out on the street.  I was so tempted to take that associate position at Merrill, but working with a team I disliked for a year of higher pay, and then getting laid off…  now I can see how big a bullet I dodged.

Amidst all this turmoil, I am thankful to have my health, supportive family and friends, a roof over my head and a job.  Take a deep breath, focus on your goals while being observant of the world around you, and maintain perspective.

How are you coping with the market volatility?