A Global Rout, a Bank of America Miss
Global stock markets have a second really bad day in a row. Bank of America stays profitable this quarter, but barely. And think twice before you invest real money in a virtual world.
EWS AT A GLANCE
Global markets extend steep slide
Asian markets closed sharply lower today, extending a global stock market slide that started yesterday due to fears of a U.S. recession. Hong Kong’s Hang Sang index closed down 8.7 percent, Japan’s Nikkei 225 slumped 5.7 percent, and trading was halted on Mumbai’s exchange for an hour after stocks dropped 10 percent minutes after opening. (AP in Yahoo! Finance) European markets were also sharply lower early today. (Reuters) More than half the world’s top stock indexes have now fallen into bear markets—defined as at least 20 percent off recent highs. “We’ve seen panic selling,” said Matthias Jasper at WGZ Bank in Dusseldorf, Germany. “These people are selling with conviction.” (Bloomberg)
Bank of America profits sink 95 percent
Bank of America, the second-largest U.S. bank, reported a 95 percent drop in quarterly profits, to $268 million. The results, fed by at least $5.28 billion in mortgage-related writedowns, missed Wall Street estimates by a wide margin. The firm also set aside a $1.74 billion reserve for further credit losses. (Reuters) CEO Kenneth Lewis has bet heavily on the U.S. housing market with his $4 billion bid for Countrywide Financial, but he has also cut 1,500 investment banking jobs since October. “Investment banking isn’t Ken Lewis’s core competency and he doesn’t need it,” said Bruce Foerster at South Beach Capital Markets in Miami. (Bloomberg)
Roche buys U.S. diagnostics firm
Roche Holdings AG, the largest cancer-drug maker, agreed to pay $3.4 billion for medical diagnostics company Ventana Medical Systems. Arizona-based Ventana makes tests that use human tissue to diagnose disease, and Roche will use the acquisition to boost its cancer diagnosis business. (Reuters) Ventana had rebuffed an earlier $75-a-share offer from Roche as too low, but its board accepted the increased bid of $89.50 a share. “It’s not a bargain, but there are no bargains these days in diagnostics or pharmaceuticals and biotechnology,” said analyst Denise Anderson at Landsbanki Kepler in Zurich. (Bloomberg)
Banking in your Second Life
Promised interest rates of up to 40 percent convinced players of the online virtual reality game Second Life to deposit $75,000 in real money with Ginko Financial. But when Ginko disappeared from the virtual world, with the deposits, chaos ensued. The game’s maker, Linden Lab, banned all virtual banks, effective today, and that led to a run on virtual ATMs as well as virtual stock market and real estate crashes. The debacle led to some calls for government regulation of the lawless Second Life world, but “most members of Congress don’t understand what this is all about,” said economist Dan Miller with the Congressional Joint Economic Committee. (Los Angeles Times, free registration)
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
MOST POPULAR ON THE WEEK
- Who are the real gay marriage bigots?
- What would a U.S.-Russia war look like?
- Why is American internet so slow?
- What the collapse of the Ming Dynasty can tell us about American decline
- Don't worry: World War III will almost certainly never happen
- Religious liberty should be a liberal value, too
- Watch The Daily Show mock Fox News' confused man-crush on Vladimir Putin
- The new bride who had a horrifying allergic reaction to her husband's sperm
- 22 TV shows to watch in 2014
- The Daily Show's Aasif Mandvi dismantles another ObamaCare myth
Subscribe to the Week