So, anyone invested in any stock market?

[Brother None]

While I won't believe the hype of "THE NEW 1929" or even "THE NEXT 1987," because market analysts love hyping stock market crashes, this is one crash that's long overdue...

And we're being hit left:

Stocks on Wall Street Thursday suffered their biggest one-day decline since February after the turmoil in the home-loan market caused renewed concerns about tightening credit worldwide.

The decline began at the opening bell after a French bank, BNP Paribas, suspended operations of three of its funds in the wake of turmoil in the American market for home loans. The European Central Bank and the Federal Reserve injected cash into the financial system because of tightening credit markets.

(...)

Most experts believe the nation's mortgage problems will likely worsen in the coming months as hundreds of billions in adjustable-rate loans reset to higher rates in the next 12 to 18 months. At the end of March, nearly one in five subprime home loans were either past due or in foreclosure.

At his news conference this morning, Bush said he did not support granting U.S. government funds to distressed homeowners who are on the verge of losing their homes, but he said the Federal Housing Administration should have flexibility to help borrowers refinance their home loans.

He also said he felt "there needs to be more transparency in financial documents" so that borrowers "know what they're signing up for."

The market appeared to react positively to remarks by Bush that the administration would not favor changing the way partners in private equity firms are taxed. In recent months, several prominent lawmakers have proposed subjecting the investment gains of fund managers — known as "carried interest" — to the ordinary income tax rate of up to 35 percent, rather than the capital gains rate of 15 percent.

And right:

Fears of a credit crisis in Europe deepened Thursday, as a big French bank announced it would close three investment funds, and the European Central Bank injected emergency funds into the market for the first time since the aftermath of the Sept. 11, 2001 terrorist attacks.

BNP Paribas, the large French bank, said it had suspended operations of three funds because the deterioration of the U.S. mortgage market had made it impossible to value their underlying assets. It was the latest in a string of disclosures of losses or potential losses by funds and banks in Germany, France, and the Netherlands. And it confirms that the crisis, which began in the subprime segment of American home-loan market, has spread to the heart of Europe's financial markets.

The European Central Bank's intervention, which came after overnight borrowing rates spiked to their highest levels since 2001, was intended to soothe the markets. But analysts said it may have had the opposite effect, stoking fears that the worst of the fallout has yet to be felt in Europe. In the United States, the Federal Reserve also added cash to the market.

"What we are seeing is financial contagion in action," Peter Dixon, an economist at Commerzbank in London, said.

I'll personally say "I told you so," because I've been saying this has been coming with the retarded state of the American housing market for some time now.

But still, is this a dip, a crash, or what? I don't trust the sounds of "meh, it's nothing" for the simple reason that we're dealing with an inherent problem here, not something that'll go away after a while.

Still, wonder how far this'll tumble.

 

[SuAside]

well, the american loan / property-realestate bubble clusterfuck is costing the european and asian stockmarket too...

so your title should really be have you invested in the stockmarkets, not just the american one.

BNP took the largest hit, but everyone is panicking.

i find it rather funny how this displays the frailty of the entire system. can you imagine what would happen if lets say Saudi Arabia or China pulled out all their investments from the USA? total market collapse.

 

[Maphusio]

Wow, I have not really paid much attention to this and I think I really should be. It's a bit of an eye opener for myself. I'm still trying to comprehend the 5 W's myself though... American home loans are causing foreign banks the blues? ...I really don't pay too much attention to financial matters on a global scale as I do other things.

 

[monsharen]

uggh, we'll face devalued paper sooner than we'll know it!

"Son, go to the shed and bring forth another wheelbarrow of wallpaper."

european stock markets are already "slowly" going downwards because of this fear but if you believe this will pass soon, sell your gold today.

 

[SuAside]

Wow, I have not really paid much attention to this and I think I really should be. It's a bit of an eye opener for myself. I'm still trying to comprehend the 5 W's myself though... American home loans are causing foreign banks the blues? ...I really don't pay too much attention to financial matters on a global scale as I do other things.

the whole financial market is interwined by holdings, participations and partnerships.

BNP (the french bank) had a stake in some american loans. turns out they're likely worthless and unlikely to even be paid back due to the whole realestate thing in ze US of A. this means they'll make a shitload less profit and even very likely deficit. the stockmarket hits the panic button. the rest is history.

of course, this isn't about one bank, but nearly all american banks and affiliates.

now, european (and i guess american) economists have seen this comming for years. at least my economy teacher at the university and his colleagues had. so it shouldnt cause such panic. but the problem is that most people on the stockmarket are sheep and that if the sheep panic, a lot of the automated computerized safeguards of the larger holdings jump into action to minimise their loss, thereby adding to the whole panic.

 

[Maphusio]

Wow, I have not really paid much attention to this and I think I really should be. It's a bit of an eye opener for myself. I'm still trying to comprehend the 5 W's myself though... American home loans are causing foreign banks the blues? ...I really don't pay too much attention to financial matters on a global scale as I do other things.

the whole financial market is interwined by holdings, participations and partnerships.

BNP (the french bank) had a stake in some american loans. turns out they're likely worthless and unlikely to even be paid back due to the whole realestate thing in ze US of A. this means they'll make a shitload less profit and even very likely deficit. the stockmarket hits the panic button. the rest is history.

of course, this isn't about one bank, but nearly all american banks and affiliates.

now, european (and i guess american) economists have seen this comming for years. at least my economy teacher at the university and his colleagues had. so it shouldnt cause such panic. but the problem is that most people on the stockmarket are sheep and that if the sheep panic, a lot of the automated computerized safeguards of the larger holdings jump into action to minimise their loss, thereby adding to the whole panic.

Fuckin' eh. Thanks for the explanation. That confirms my theory on this that I dreamed up while on my way home from work yesterday... now, on to literally 30 miles of gridlock traffic... Go Washington State! ...Thinkin I should call in.

 

[Brother None]

Looks like it quieted down by pumping lots of money in this.

what is it with incompetent economic management?

They actually handed out state loans to banks accepting as collateral not just the classic "heavy investments" like state obligations, but actually, get this, accepting the very high-risk mortgage and loans that caused this problem in the first place as collateral.

Brilliant, just brilliant. Instead of moving to cure the disease, they just morphined up the patient and then infected themselves with the patient's disease.

Man. It's probably over for now, but expect it to strike back with a boatload of vengeance in the near future. The inherent, structural problems have just been exacerbated, and not a little bit either.

 

[xdarkyrex]

Yay for American economics!

Here, more development on our economy that are sure to affect stocks.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

 

[Brendon]

If the worst thing China wants to do is make the dollar worth less, I'd take it. They could do a lot worse...

 

[Briosafreak]

If the worst thing China wants to do is make the dollar worth less, I'd take it. They could do a lot worse...

Well no, that would be the equivalent to an economic thermonuclear explosion. Many call the era we're living of as the Asian Dollar era...

The one thing the Americans think would happen is that if the Chinese dollar reserves are equal to a day of trading in New York what could happen, right?

Wrong, 50% of those reserves being thrown on the market at once would be enough for a collapse of the dollar and chaos in international transactions, which are still preferably made in dollars.

And hyper inflation would display her ugly head...

It would be chaos, the equivalent of hundreds of terrorist attacks at once, and the Americans could only blame themselves, with their unbelievable debt and the way it placed them in the hands of foreign powers.

How does a government that preaches small state expenditure spends so much, writing off the surplus from the 90's, is beyond me.

 

[Starseeker]

I wrote this a while ago, and it still applies. Don't believe the hype is what I would call it. (btw: I forgot to mention this in this piece, currency is still heavily controlled in China, and much of the economical policies are still done like the 50s Russian style planned economy)

Actually, that's not true. RMB is a controlled currency. It doesn't actually exist (per se) in the world market. RMB is pretty worthless outside of China. All these talks about the sleeping dragon, and the waking of its economical power is pointless in the sense that China will hit a wall soon. The wall is in the government's attitude towards education and economy. China is already struggling in trying to go from industrial economy to knowledge economy. The next phase of economical shift will put greater strain at the Chinese economy/governmental policies than ever before.

RMB isn't pegged to the silver or gold. If the currency is only worth as much as you are willing to trust the government to back it, I wouldn't put much value in RMB. Unless RMB can be traded freely around the world, I wouldn't put much stock in the "perceived" buying power of China.

As for the other worry? China wouldn't dump its US dollar reserve, simply because RMB is useless outside of China. If Chinese economy continues to grow, all is fine and dainty since everyone wants to do business there. If it slows or hit a depression at all, RMB is worthless. The Chinese economy is created by foreign investment. Genuine home grown Chinese businesses don't cross borders very well. It's all artificial.

I am predicting India as the next powerhouse. Vietnam, Laos, and other south eastern Asian countries has already started to eat away at the Manufacturing pie that China is trying hard to hold on to. Reputation is important in this market, but China doesn't have a very good one. And until QC and safety regulation is taken more seriously than wall flowers in China, that ain't going to happen.

Anyway, all these predictions came from people reading data and news from Chinese sources, and we all know how much trust we can put in the Chinese media.

 

[slicer17]

21,000 mortgage brokers/bankers and 120 mortgage banks laid off or closed down.

So glad to be a loan officer right now!!!

 

[SimpleMinded]

Starseeker, that's a good post and a valid point. And honestly, if I were to go by anyone's word here... it would be the inside man .

 

[st0lve]

I have some stocks, I don't care about them. I should, but then again, if I do anything wrong them might suffer a major failiure and I go broke.

My dad loves stocks, he managed to buy a 05 Jeep Grand Cherokee (when it was just out in Norway) on just stock money (and it was just a small bit of it). (It costs around $80k here in Norway)

Only downside with the stocks, is if they go down, he will get mad, for an entire week, month or just a few days.

 

[Zaij]

But still, is this a dip, a crash, or what? I don't trust the sounds of "meh, it's nothing" for the simple reason that we're dealing with an inherent problem here, not something that'll go away after a while.

Still, wonder how far this'll tumble.

"Meh, it's nothing" has been said right before just about every crisis in the last 100 years at least. Something tells me the trend will only get worse.