Investment Analysis and Portfolio Management Assignment

Running head: INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
Investment Analysis and Portfolio Management
Name of the Student:
Name of the University:
Authors Note:

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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Table of Contents
1. Comparing two companies in term of financial health/position:...........................................2

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Compulsory Question:
1. Identifying the financial crisis for analysis:
The financial crisis of 2008 is mainly used for the analysis part in the study, which
destroyed banking and financial sector of the world. The financial crisis of 2008 was one the
major atrocities in the modern world, where capital market and financial sector all around the
world crumbled. The analysis of financial crisis might help in detecting the problems that was
the main cause for the decline in financial sector. The augmentation of the financial crisis
started with the announcement from George Bush regarding the fulfilment of every citizens
American Dream.
2. Tracking the flow of events that took place about the causes:
The announcement of low priced housing loan to individuals all around America
started the sphere of financial crisis. The announcement made by George Bush after the
commencement of Presidential house started a crippling effect, where banks could issue loans
to all individuals residing in America. The time line for the Global Economic & Financial
Crisis are depicted as follows.
Date Event
Year 2007 Housing crisis deepens, as the losses in subprime loan rises due to the
increment in worthless assets as foreclosures grows. This damage in
mortgages sector reaches the top echelons of Wal Street.
February 7, 2007 Announcement of losses linked with US subprime mortgages
announced by HSBC
February 7, 2007 Freddie Mac indicated that they will not buy risky subprime loans any

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further due to the increment in defaulters of loan.
April 2007 New Century Financial files bankruptcy-court protection, who was on
the major subprime mortgage lender in US. The declining value and
rising risk involved in mortgage industry might led to financial
instability of New Century Financial.
August 2007 The American Home Mortgage Investment also files for bankruptcy
protection due to the declining mortgage value and returns.
August 2007 Rating of Countrywide Financial was reduced by Fitch Rating to its
third lowest investment grade due to the declining valuation of
mortgage.
January 2008 The recession in US economy starts due to the crisis in subprime
mortgages and mortgage credit market.
January 2008 Countrywide Financial is bought by Bank of America for about $4
billion
March 2008 Federal Reserve agrees to guarantee $30 billion of Bear Streams assets
in connection with government sponsored sale to JPMorgan Chase.
July 2008 IndyMac Federal Bank was seized by Federal regulators, as it became
largest regulated thrift to fail
September 2008 The government takes over Freddie Mac and Fannie Mae due to the
accumulation of high debt
September 2008 Merrill Lynch agreed to buy bank of America for $50 billion
September 2008 Lehman Brothers filed bankruptcy protection due to its incapability to
continue their operations.
September 2008 American internal group accepts $85 billion as the bailout package and
introduced 79.9% stake to the government.