Oh noes...how can this go on? [markets open a further -10%]

[edesignuk]

$700bn from the US, £500bn from UK, lord knows how many other billions from other central banks, global interest rate cuts...and the markets still aren't happy.

Stock markets across Europe have fallen steeply on opening after earlier dramatic share price falls in Asia.

The FTSE 100 share index plunged 9.8% to 3887 points, the first time it has fallen below 4,000 points in five years.

There were similar falls across Europe - Paris was down 9% while Germany was down 9.6%.

Earlier Tokyo's Nikkei index dropped 9.6% while shares in Australia, Hong Kong and Singapore all plummeted. BBC (http://news.bbc.co.uk/1/hi/business/7662572.stm).

138801

[dukebound85]

i dont know how much further but this stabilization is necessary imo

[iBlue]

Looks like that was £500billion well spent. :rolleyes: :(

[dukebound85]

haha i like both of your avatars

[Applespider]

It does all feel a little like the arsonist is fighting the fire... :rolleyes:

Peston's blog on the Beeb is useful for cutting through the crap and making sense of what's going on in language that non-financial wizards can understand. Apparently, today's falls are to do with the potential fall out of insurance claims on Lehman's losses and what proportion may be unpaid and therefore further affect bank balance sheets. It's $400bn worth apparently so there are questions as to how much of that the state aid could cover given the other demands on it.

[Anuba]

$700bn from the US, £500bn from UK, lord knows how many other billions from other central banks, global interest rate cuts...and the markets still aren't happy.
Well, it's not like someone took a bag with $700B to Wall Street immediately after Congress passed the bill and said "here, happy now?"

Nobody has seen a dime of all these bailouts yet. When the banks get the money, bank credits will start flowing again, and then it will take a while for the markets to see any sign of improvement that restores confidence.

All the expert commentators say that it's much too early for the bailouts to have any effect, it's gonna take weeks, maybe even months.

[edesignuk]

Well, it's not like someone took a bag with $700B to Wall Street immediately after Congress passed the bill and said "here, happy now?"I realise that, but you'd think/hope the promise of what's to come would at least steady things, as it is they're progressively getting worse.

[pseudobrit]

There are two things potentially happening.

(The U.S. market is the monster controlling the rest of the world, so I'll speak in terms of our market on the understanding that the world markets are tied almost directly to the U.S.)

One is that we're resetting to the pre-housing bubble levels in the markets. This will bring the DJIA back around 8000, though it could oversell on the way to stabilizing.

The more frightening prospect is that we're resetting to pre-dotcom bubble, which puts the Industrials on a path for anywhere between 4000-6000 (again, it could oversell on the way down).

If you think about it, a bubble is phantom money, and the dotcom bubble never completely collapsed, as it was cushioned by the rising housing bubble. Efficient market theory is falling apart before our eyes. The markets are finally realizing this money was never there and never will be.

What's wrong with this picture?
138815

[Anuba]

If you think about it, a bubble is phantom money, and the dotcom bubble never completely collapsed, as it was cushioned by the rising housing bubble. Efficient market theory is falling apart before our eyes. The markets are finally realizing this money was never there and never will be.
Isn't all money phantom money these days?

Once upon a time people traded a fur for a barrel of fish. Then they thought -- hey, let's start using a universal "currency", something of value like precious metals, so they made gold, silver and copper coins. Then they said hey... screw the coins, let's make assets symbolic and just print numbers on pieces of paper. Then plastic cards replaced the paper, and now the barrel of fish is just a few bytes on a hard drive somewhere. There are so many layers of abstraction and virtualization these days with all these stock fund debt bond check credit security thingamabobs that are re-re-re-re-packaged and wrapped and tangled up like a gargantuan Gordian knot, the market has become like the climate, so complex, whimsical and unpredictable that sophisticated computer models can't even begin to make sense of it.

[.Andy]

What's wrong with this picture?
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The axes aren't labelled?

[calculus]

Isn't all money phantom money these days?



Yes it is, which is why I am highly amused by people taking their cash out of the banks and keeping it in a safe at home. All they're really doing is exchanging a number in a bank's computer for a number written on a piece of paper.

[pseudobrit]

Isn't all money phantom money these days?

Once upon a time people traded a fur for a barrel of fish. Then they thought -- hey, let's start using a universal "currency", something of value like precious metals, so they made gold, silver and copper coins. Then they said hey... screw the coins, let's make assets symbolic and just print numbers on pieces of paper. Then plastic cards replaced the paper, and now the barrel of fish is just a few bytes on a hard drive somewhere. There are so many layers of abstraction and virtualization these days with all these stock fund debt bond check credit security thingamabobs that are re-re-re-re-packaged and wrapped and tangled up like a gargantuan Gordian knot, the market has become like the climate, so complex, whimsical and unpredictable that sophisticated computer models can't even begin to make sense of it.

The problems we face are not directly a result of using fiat currency or fractional reserve banking, but in the 700-1000 trillion dollar derivatives market. You could make a claim that the derivatives market would not have materialized without the stage being set by such systems.

[djellison]

You know how all the dot-com stuff crashed

This is just a crash for everything else.

The worlds financiers have been lying to themselves and to us by offsetting idiotic spending and lending against over-valuation of companies the world over.

The growth of the worlds financial institutions had to come to a halt - they were gambling with air. When it caught up with them, when the sub-prime began to fall apart, that was simply the catalyst to wake up Wall Street (and thus the world) that they were kidding themselves that such a system was ever sustainable.

But you know what - as sure as anything - there are people making BILLIONS at the moment- BILLIONS and BILLIONS of dollars because of how the market is behaving. Look at share prices over the past week. There are days when a single company will drop 40% of its value, regain 20% of its value, drop 20% more, then return back to where it was over 48 hours. If you know what you're doing, this is a share-trading orgy.


Doug

[BoyBach]

Peston's blog on the Beeb is useful...


I think that the blame lies solely with Robert Peston for all of this.

Everything was fine until he came on the news last year and told us about Northern Rock, since then everything has gone tit's up!

Coincidence? I think not. ;)

[miloblithe]

What's wrong with this picture?
138815


Well, principally, it uses a linear rather than logarithmic y-axis.

[MacNut]

since then everything has gone tit's up!Isn't that a good thing?:p;)

The one thing I fail to understand is how can we bail out with money that we don't have. Where is this $700b coming from. We are just pulling it out of thin air and giving it to people.

[leekohler]

Isn't that a good thing?:p;)

The one thing I fail to understand is how can we bail out with money that we don't have. Where is this $700b coming from. We are just pulling it out of thin air and giving it to people.

Oh no- it'll get paid, but not by us. It'll get paid by future generations in ways that I shudder to think about.

[MacNut]

The best part is that congress was all in a panic that this had to pass right away before the markets fell apart...

[Berlepsch]

What's wrong with this picture?
138815

It needs to be in logarithmic scale to make any sense at all.

What have I won?

[edesignuk]

There's nothing in red! :eek: :cool:

139531

[Anuba]

Yeah, leave it to the EU to save the day. ;)

[Wild-Bill]

Great..... I pulled my money out on Friday. :( I should have waited another day. Murphy's Law - the S&P up over 11% yesterday. :(:(

I think I'm going to take my money and invest it in factories....... that make miniature models of factories.

[patrick0brien]

One is that we're resetting to the pre-housing bubble levels in the markets. This will bring the DJIA back around 8000, though it could oversell on the way to stabilizing.

The more frightening prospect is that we're resetting to pre-dotcom bubble, which puts the Industrials on a path for anywhere between 4000-6000 (again, it could oversell on the way down).

If you think about it, a bubble is phantom money, and the dotcom bubble never completely collapsed, as it was cushioned by the rising housing bubble. Efficient market theory is falling apart before our eyes. The markets are finally realizing this money was never there and never will be.

What's wrong with this picture?
138815

-pseudobrit

I have a whole new level of respect for you, I had no idea you were so Macroeconomically savvy.

You hit the nail on the head "the dotcom bubble never completely collapsed, as it was cushioned by the rising housing bubble"

I have read this exactly once in all my research (BTW as part of my job, I'm up to my eyeballs in constant Macroeconomic research). This is why I find myself yelling at the TV news because they are all glomming onto the rating-grabbing statements like "Is this a new Depression" or "The end of capitalism?" while conveniently forgetting the S&L collapse of the late '80s, or the fact that the U.S. housing sector has collapsed 6 times since WWII.

(One specific today that REALLY got me mad was that after yesterday's rally, I though "And watch, if we've found a floor, we'll see a seesaw over the next few days, possibly up to 10, with little or small lower closes - and some frikken new source is going to call it as a failed rally." Guess what... >:( )

Ok, sorry, that was a little frustration, I considered deleting it because I usually don't spout in front of you guys, and there's a tendency by folks to attack stuff like it, but maybe it's better to leave it to provoke thought.

Anyway, I'm not too concerned about pre-dotcom levels as evidence shows, the original promise of the dotcom, that in turn lead to the bubble has actually been realized, therefore the intrinsic value of the market is actually higher than the pre-dotcom bubble. Yes, the housing bubble obscures where that value is with it's own rise, but I think we're getting close. My guess: around 9000. Add to that floor an inevitable rebound in Banks, Insurance and yes, eventually Real Estate (FIRE industries).

Hopefully, green industries can add to that further, though I think it's too early to tell by how much, and when. Hopefully, we won't soon forget the serious dent Gas prices made to all of our wallets this year, and we've had enough.

[pseudobrit]

-pseudobrit

I have a whole new level of respect for you, I had no idea you were so Macroeconomically savvy.

You hit the nail on the head "the dotcom bubble never completely collapsed, as it was cushioned by the rising housing bubble"

I have read this exactly once in all my research (BTW as part of my job, I'm up to my eyeballs in constant Macroeconomic research). This is why I find myself yelling at the TV news because they are all glomming onto the rating-grabbing statements like "Is this a new Depression" or "The end of capitalism?" while conveniently forgetting the S&L collapse of the late '80s, or the fact that the U.S. housing sector has collapsed 6 times since WWII.

You should try grabbing Bloomberg's "On the Economy" Podcasts. Tom Keene deftly interviews such great thinkers and as Shiller, Calomiris, Krugman, Roubini, Feldstein, Melter, Merck, etc., etc. It never gets dull.

I can no longer stomach the stupidity and lack of sophistication I hear from the media or political quarters regarding what I feel are fairly simple economic principles. They all play to the lowest common denominator and we all suffer because of the lack of relevant information and analysis.