Tuesday, Sep 16, 2008
How will the economy respond to Monday's collapse of Lehman Brothers and takeover of Merrill Lynch?
Intrade's Prediction Markets indicate that though it remains unlikely, the chances of a recession hitting this year have increased dramatically since late Sunday.
The likelihood of a 2008 recession jumped sharply from 11.7% when news of the events began to percolate to 20.0% by the close of trading Monday at the New York exchanges.
Lehman Brothers, a 158-year-old New York investment bank, filed for Chapter 11 bankruptcy in New York Monday after last-minute negotiations to find a financial lifeline fell through. Merrill Lynch agreed to a $50 billion deal to become part of? Bank of America Corp, hoping to avoid a similar fate.
The jump reversed a week-long trend in the 2008 U.S. recession market. Chances had been falling steadily over the past five days, coinciding with John McCain's surge to overtake Barack Obama for the first time in the race for the White House.
Intrade's market on a possible 2009 U.S. recession now trades at 50.0%, up 3% since early Monday.