The tremors from the failure of Lehman Brothers (LEH) are still being felt across the globe in what I feel might be last act in the financial meltdown we have experienced this year. As I read the announcement of Lehman’s decision to declare bankruptcy on Sunday night, I watched the Indian stock market crash with the BSE Sensex dropping more than 800 points to 13,150 before recovering to close at 13,531, a loss of 470 points or 3.35%. Much of Europe shared a similar fate with London’s FTSE 100 dropping 3.92%. In contrast the 250 to 300 point loss that the Dow posted through most of the trading session on Monday felt like a muted response until things fell apart in the last hour of trading and the Dow Jones Industrial Average closed the day with a loss of 504.48 or 4.42%. Tuesday seems to be shaping up as another day of losses with the BSE Sensex dropping nearly 400 points in the first few minutes of trading before recovering some of those losses, the Japanese Nikkei index dropping 5% (the Japanese market was closed on Monday) and FTSE 100 falling 1.5%.
The obvious question on every active investor’s mind is “what now?”. While having lunch with a friend from Smith Barney yesterday, he mentioned how this bear market was different from the one we experienced after the dot com bubble burst where one could at least find some sectors or asset classes like bonds that continued to perform well. This market is directionless and almost every sector, country and asset class seems to be going down in unison.