First, here are some cold facts. Next, we’ll go into the implications. REMEMBER, I am NOT A FINANCIAL PLANNER. I’m simply speaking here as your average joe-ette Cdn making sense of things on her own.
And last, AIG (some of you may recognize the name from your mutual funds) which started the year with a share price of $56.45 has been steadily falling, and took a nose-dive over the weekend to end up in the $5 range. Why did AIG tumble? Well if I’m understanding this correctly (and I’m open to correction here!), they tumbled because they insured – and may themselves been tangled up in? – companies like the ones above who invested in those nasty mortgages — the ones people are defaulting on.
So. What does this mean to you fellow Canadians?
Well for one thing, if you have a mutual fund/stock portfolio containing shares in the Big Banks, you may take a hit depending on how much the bank was exposed to this (ie. had invested in the above companies in any way). Similarly, SunLife Financial is going to be forced to write down $334Million. (“Write Down” essentially means, declare on the books that their worth has dropped by that much. Sort of like, if your house price plummeted, your net worth would also go down).
For another thing, interest rates may get cut again (this keeps money moving in the economy) at a time we might be tempted to hunker down.
Beyond that, hard to say. But here’s something interesting: Royal Bank of Scotland predicted this very thing would happen, pretty much right now.
If ever there were a time to read the financial pages, it’s now. These are absolutely fascinating days, even for someone who’s a money coach, not an economist or a financial planner.