Source: Defaqto IABN

Shares crashed again yesterday and are falling as I write this today, this time the FTSE 100 fell to its lowest level since March 2003. But actually, even that comparison understates the extent of the fall. The FTSE 100 reached its all-time high of 6930 on the 30 December 1999; last night it closed to within a hundred or so points of half that level.It was news from HSBC and AIG that did it this time. The US insurer, which is now largely owned by the US government, revealed further losses of $61.7bn in the last three months of last year. It was the biggest loss in US corporate history, the sums of money involved are simply staggering, and yet it all came in just one quarter. No wonder the markets were all of a tizz.

By contrast, HSBC was something of a hero. It did after all turn in a profit of $9.3bn. Okay, that was 62 per cent down on last year, but even so, it was still an enormous profit. The thing that got the markets running scared over HSBC was that the bank revealed plans for a £12.5bn rights issue. Now, when banks reveal plans to raise that kind of money, they must be desperate, or so goes the reasoning. HSBC has of course been one of the globe’s star banks during this crisis. Not for this bank, a need to dip toes in Troubled Asset Relief Programs; not for this bank, any need to help itself to government bailouts, and give up equity in return.No, despite being the first bank to warn of subprime related difficulties, HSBC has come through all of this with its reputation intact. But, then again, if this crisis has taught us anything, it is that things are unpredictable.

The HSBC rights issue price is at a 40 per cent discount on the HSBC share price at the time it was announced. The snag is, at one point yesterday, shares in HSBC were down 20 per cent. If it suffers from many more falls like that, then the rights issue may look expensive, and that really would be catastrophic. HBOS suffered from that very problem, before it had to rush into the safety of the UK government’s arms.HSBC also has its shareholders who are not impressed. Banks need confidence. And if you take a pessimistic view on anything, it will look bad. So, if shareholders start looking at the worst all the time, confidence will just run away. If you value all HSBC assets at fire sale prices, then the bank is in trouble. If the bank was forced to sell off its assets in a hurry, then it would probably head into oblivion, or somewhere close by. But the point is, HSBC does not need to do these things.

In fact, as was argued, HSBC is, if you take a different view, in an incredibly strong position. With the cash from the rights issue, its balance sheet will be strong. Many of its rivals are government owned, or at least virtually government owned, and this means they pose less competition.Right now, a bank like HSBC, with its tentacles spread around the world, especially in China, has the opportunity to carve itself a massive share of the global market.It you look at things from a pessimistic point of view, HSBC is potentially in big trouble. If you look at things from an optimistic point of view, it is sitting on extraordinary opportunity.

It’s like that with the markets. Back in 2003, the collapse in markets represented a new buying opportunity. If you had bought in March 2003, and somehow, via remarkable prescience, sold in the spring of 2007, you would have made a very nice profit. The cheaper stocks fall, the greater the opportunity.

But then again, if we really do plunge into global depression, markets could fall a lot further still.But, honestly, there are good reasons to think depression can be avoided. For one thing, it seems that many of the world’s most influential people have learned the lesson of the 1930s. In all the talk of doom and gloom, very little reference is made of the fact that the world’s ability to produce has reached unprecedented heights, too.