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| Oops ! here we go again ..... panic has broken out; in share markets AGAIN .... ZZZZZZZZ | |
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| Tweet Topic Started: Jan 22 2008, 06:28 AM (479 Views) | |
| Dandandat | Jan 22 2008, 03:42 PM Post #16 |
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Time to put something here
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Value is simply the price one is willing to pay for a object. The Value of a company is simply the price one is willing to pay to own a share of ownership in that company. If people become afraid of the over all economy they are less willing to take risk. If they are less willing to take risk, they are less willing to pay a certain price for ownership in a company. There for a company can loss value through no fualt of its own. People simply don’t wish to own it (or anything) at this moment. If it was simply a matter of a company or companies not performing well, then the solution would be simple. Allow those companies to go under as they are not worth being open. Survival of the fittest. But situations leading to receptions are more complex then that. |
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| STC | Jan 22 2008, 03:42 PM Post #17 |
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Commodore
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The reason share prices are falling is because investors are worried about the state of the world economy, in particular the situation of the banks following the 'credit crunch'. There is uncertainty about the extent to which the banks are exposed to debt that will not be repaid to them. The worse this situation turns out to be, the less money the banks will lend (and what they lend will be at higher rates of interest). Hence, there will be less borrowing in the economy >>>> less investment spending and less consumer spending >>>> falling sales revenues, lack of business expansion, loss of jobs and, for the businesses most affected by a consumer/investment downturn - business failure. So, to a large extent, its the concerns about the world economy fuelling the stock market falls, not the other way around. Having said that, if share values fall, people's wealth that is held in shares also falls i.e. they'll become poorer. So, they'll spend less, businesses will invest less and so on.... repeat analysis above. |
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| Hoss | Jan 22 2008, 06:01 PM Post #18 |
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Don't make me use my bare hands on you.
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If share values fall, the market will be oversold and bargain hunters will start buying up stocks that they consider to be undervalued and the cycle continues. Same way with banks and loans. |
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| STC | Jan 22 2008, 06:08 PM Post #19 |
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Commodore
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According to classical economic theory that should happen, with the market returning to 'equilibrium'. This doesn't always happen in practice as investor confidence is an additional factor in the equation. If the perception is that share prices will fall or remain stagnant, or that economic prospects are so bleak that investors become risk-averse, such investment decisions will be delayed and the economy will continue to be sluggish, or worse. The banking situation is even more interesting. Usually, by the central bank of whatever country changing the Minimum Lending Rate (MLR) i.e. the base rate, it then cascades through the banking system to affect the rates at which the commercial bank lend money. So, to get more liquidity in the UK economy for example all the BofE had to do was lower the MLR and the rest followed... However, because the banks are now so reliant on each other for funds and because the credit markets have locked up, there is now evidence of a divergence between the rate at which central banks lend to the commercial banks and the rate at which they lend to each other. In short, the current crisis suggests the possibility that central banks are less able to increase liquidity via interest rates. This is why the major central banks acted in unison using their own funds to add liquidity to the banking system and tried to loosen things up. But there's only a limited extent to which they can afford to do this. Interesting times... |
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| ds9074 | Jan 22 2008, 06:29 PM Post #20 |
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Admiral
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One thing I dont understand in this situation - the Bank of England has lent £55bn to Northern Rock and made X billions avaliable to other banks. The European Central Bank and the Federal Reserve have also made vast sums avaliable. Where the hell is that money comming from? Its not small change you can find down the back of the Treasury sofa. We are talking about, in the UK case, more than we spend on defence. The media have described it as "taxpayers money" but how can that be strictly true. Is this 'printed money' or is the government borrowing it from somewhere/someone? |
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| somerled | Jan 22 2008, 09:01 PM Post #21 |
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Admiral MacDonald RN
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When did Noah move to Australia ?The Australian dollar has appreciate considerably in value and way things are going will be worth more than USD soon. Unlike the USA, the Australian economy is booming. Unlike the USA , housing in Australia is in short supply (particularly in those areas where the boom is happening) and we are not being affected by the Subprime Credit Crunch. I think Bush Jr and his adminisration are very much in panic mode , I also think the USA Fed Reserve has hit the panic button. What goes around comes around, USA is in recession, there in no doubt about it now. |
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| somerled | Jan 22 2008, 09:05 PM Post #22 |
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Admiral MacDonald RN
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Probably all borrowed from the Chinese and from those cashed up Saudis and Kuwaites , or they are simply printing more money . |
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| Hoss | Jan 23 2008, 08:36 AM Post #23 |
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Don't make me use my bare hands on you.
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Yes, an economy that is growing is actually in recession. Good one. |
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| Dr. Noah | Jan 23 2008, 09:06 AM Post #24 |
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Sistertrek's Asian Correspondant
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Found a little piece on that: World Economic Forum Opens in Davos By MATT MOORE and BRADLEY S. KLAPPER – 1 hour ago DAVOS, Switzerland (AP) — The outlook for the global economy this year is decidedly dour, but leading economists at the World Economic Forum in Switzerland had mixed views Wednesday about the possibility of a global recession. "If there is a tremendous slowdown in the U.S. economy, then we must be worried about it," said Yu Yongding, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, as concern grew over market turmoil and a possible U.S. recession. He said China's growth could help it weather any slowdown as the nation expands trade with countries outside the United States. The potential for a global slowdown triggered by a U.S. recession was top issue among economists from Asia, the United States and government ministers from India and China. Stephen Roach, chairman of investment bank Morgan Stanley in Asia, said there would be global ramifications should the world's largest economy falter. Asked by a Mexican businessman if his country could sidestep a U.S. recession, Roach was blunt. "My good friend from Mexico, you're in trouble," Roach said. "Mexican exports to the U.S. account for 25 percent of your GDP. Same number for Canada. How can the U.S. go into recession and Mexico be fine?" Nouriel Roubini, chairman of New York-based Roubini Global Economics, cited the maxim that if the U.S. economy sneezes, the rest of the world catches a cold, but said this time the diagnosis in the U.S. was worse. "In this case the U.S. is going to have a protracted case of pneumonia," he said. The impact of the sluggish U.S. economy, and what it may portend for other nations, hung over the event, even after the U.S. Federal Reserve Bank cut its benchmark refinancing rate to 3.5 percent from 4.25 percent in response to the latest worldwide market downturn. "The United States economy will correct itself," said David O'Reilly, chairman and CEO of Chevron Corp. "I'm an optimist when it comes to the length of what may be a slowdown or a mild recession. ... the outlook is still pretty good." Economists also split over the role of central banks and whether institutions like the Fed were equipped to steer the global economy out of danger. John Snow, the former U.S. Treasury secretary, said central banks have performed remarkably over the last two decades — better than any time in history, perhaps — and continue to make the necessary adjustments. "The issue of whether central banks are capable of vigorous action, bold action, was answered yesterday," Snow said, referring to the Fed's interest rate cuts. "They can't see the world ahead perfectly, but who can?" But Joseph Stiglitz, the 2001 Nobel Prize winner for economics and a critic of free market champions, and billionaire philanthropist George Soros, disagreed. "What we have now are the foreseeable consequences of bad economic management," Stiglitz said. Lawrence Summers, former Harvard University president and Treasury secretary under U.S. President Bill Clinton, said central banks have lost their way. "I think it's hard to give central banks a very high grade over the last couple of years on recognition of ... bubbles and the ability to address them," he said. "I think it's hard to give a high grade over the last 6 months when the bubbles have been bursting and (the banks) have been behind the grade." The Forum, now in its 38th year, will also touch on the effects of terrorism, a workable peace process in the Middle East and how technology is ushering in a new age of social networking without borders. U.S. Secretary of State Condoleezza Rice and Afghan President Hamid Karzai were scheduled to address the opening reception later Wednesday. Rice is also expected to meet with Pakistan President Pervez Musharraf and Karzai in closed-door sessions. Her meeting with Musharraf will be the first since the assassination in December of opposition leader Benazir Bhutto, which pushed the nuclear-armed Pakistan into near chaos. In a nod to concern about climate change, Rajendra K. Pachauri, chairman of the U.N.'s Intergovernmental Panel on Climate Change is to speak. Al Gore, who shared the 2007 Nobel Peace Prize with the panel, is also participating in the five-day meeting. A year ago, Davos attendees foresaw a strong economy. The credit crisis brought on by massive exposure to subprime mortgage securities has changed that. "It's not about a soft landing or a hard landing," Roubini said, but "rather how hard a landing it will be." "We're seeing a financial system that is under severe stress," Roubini said. "The Fed cannot prevent this recession from occurring." Klaus Schwab, founder and executive chairman of the Geneva-based forum, said the meeting's "unique combination of the world's top business and political leaders, together with the heads of the world's most important NGOs, and religious, cultural and media leaders allows us to approach the problems that face the world in a systematic way and with an eye to tackling the major issues that face us all." The meeting itself will feature participants from 88 countries, including British Prime Minister Gordon Brown and Microsoft Corp. co-founder and chairman Bill Gates. On the Net: http://www.weforum.org http://ap.google.com/article/ALeqM5hQNEEOF...7CiMZwD8UBJD9O0 |
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| Admiralbill_gomec | Jan 23 2008, 09:43 AM Post #25 |
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UberAdmiral
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Here's what is really driving the market (from both ends). One side is a push to make this an election issue (much like the Clintons did in 1992). The other side is a fear of just what would happen if a Democrat won the White House, coupled with a Democrat Congress that wants to raise taxes... oops, not make the Bush tax cuts permanent. Currently the former is driving the news, because the news (i.e., the media) is directing the market. If they bring the "R" word up often enough, and people believe them, consumer behavior will change. It may not be enough to move the economy into actual recession, but will slow down growth to a crawl. Being discussed is the latter. You'll hear more about the raft of new social spending being proposed by Hillary Clinton as soon as she knocks off Obama. That's when the "what if" factor happens. Letting the Bush tax cuts expire will raise taxes on American workers AND businesses by two TRILLION dollars. In addition, Hillary's comments on energy production (discouraging) and mideast stability could put a huge drag on the economy. You don't conserve your way into prosperity, whether we're talking megawatts or megabucks. So, let's look at the so-called "credit crunch" or "housing crisis." Truth be told, it affects six percent of the ten trillion dollar housing market. How did it come about? Liberal polititions forcing (some would use the word "strongarm tactics") banks to lend to credit-poor constituents. Following that is a sympathetic media urging the issue. You're probably thinking I'm a Pollyanna type who believes that all is just hunky dory. No, but I do not think that things are bad. Things have been far worse and we weathered them just fine. We'll get through this dip too. EDIT: Note I did not bring up George Soros' dollar manipulations. I ignored him personally. |
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| Minuet | Jan 23 2008, 09:49 AM Post #26 |
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Fleet Admiral Assistant wRench, Chief Supper Officer
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So even the "experts" cannot agree on what is coming in the next little while. |
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| Minuet | Jan 23 2008, 09:54 AM Post #27 |
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Fleet Admiral Assistant wRench, Chief Supper Officer
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Interesting theory - I've never heard that one before. I thought it was because the banks were trying to open up new markets and make more money. Sort of the same as giving credit cards to people who cannot pay thier balance each month so that they can gouge them for the interest. Do you have any examples of these "strongarm" tactics that the poor poor banks were "forced" into? |
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| Admiralbill_gomec | Jan 23 2008, 03:51 PM Post #28 |
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UberAdmiral
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Research a man named Charles Schumer. That's a start. Most of this is his doing. The flaw in your theory is that people who can't make payments don't make interest payments either. In addition, you pay a monthly mortgage. You renege on it and you lose your house and the bank is stuck with a bad loan. Most of the subprime loans were ARM (adjustable rate mortgage) loans, usually 2/28 (two years of a low rate that adjusts upward for the rest of the loan). In addition, many of these subprime borrowers paid no money down so they had no equity in the home. Bad news all around. |
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| Dandandat | Jan 23 2008, 04:12 PM Post #29 |
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Time to put something here
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Research a man named Alan Greenspan. That's a start. Most of this is his doing. With the flood of capital in 2000 Banks had to do something with it. After exhausting shore bet loans they moved into more risky loans and then into very risky loans. No a bank can’t capitalize on defaulted moorage; but like most humans Bank policy makes suffered hubris, believing the risk was well worth the reward. And since they where deemed “To Big To Fail” that only helped to entice them. Add to that the systematic end runaround of Banking regulations brought about by the use of SIVs and Conduits, all under the nose of Alan Greenspan, and you get the problem we have today. |
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| Minuet | Jan 23 2008, 04:32 PM Post #30 |
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Fleet Admiral Assistant wRench, Chief Supper Officer
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I haven't forwarded a theory. You made an accusation and as usual liberals were your scapegoat. I haven't the time to research Mr. Schumer. Why don't you detail his involvment? Surely you can come up with at least one, strongarm tactic to back up your accusations. I presume you had something specific in mind when you made the accusation. So let it out. Let's hear it. Otherwise your accusations aren't worth the cyberspace. |
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When did Noah move to Australia ?
9:21 AM Jul 11