I wish someone could explain to me just what the H*ll is causing all of this...........
TRILLIONS UPON TRILLIONS OF BAD LOANS is what’s causing all this... created by simple undeniable unfettered greed.
The Dow will eventually retest the post 9/11 low - about 7,500. That will be a pretty good long-term buying opportunity.
“I wish someone could explain to me just what the H*ll is causing all of this...........”
in a nutshell - bad loans.
people start not paying their loans
liquidity goes right down the crapper
there is more to it but this is your starting point
Too many companies extended too much credit to too many people and other companies that were probably not going to be able to pay it back and didn’t have the level of assets necessary to properly secure the loans.
Basically it’s stage two of the housing bubble meltdown. Properties bought on speculative credit went down in price or just sat unsold. Stage one involved the up front owners going down, stage two is the creditors who gave the up front owners all that money finding out that most of that money has now evaporated. Not only will they not get it back from the people they lent it too, but even selling the foreclosed properties is only going to get them a small percentage.
But just like bad Mexican food this too shall pass.
the banks are foreclosing on the loans they BEGGED people to take.
>>I wish someone could explain to me just what the H*ll is causing all of this...........<<
Is that some sort of joke?
Here ya go:
http://seekingalpha.com/author/michael-shedlock
http://seekingalpha.com/author/tim-iacono
http://seekingalpha.com/author/barry-ritholtz
Lots and LOTS of articles dating back YEARS talking about this. It is no surprise to most of us who have been following it.
For the record, this is not about Bush, IMO, but it is bad and will get MUCH worse.
Investors buy in an imaginary world, there is no reality in value in any market today. When you buy a $5 widget for $50 or $500 you perpetuate this imaginary world. It is a fun game for the players who always make out with bags of cash while all the millions of suckers see their investments evaporate and are left asking, “what happened?”
In the previous few years there was a culture of indebtedness and easy money from banks, both in home loans and home equity loans. This produced a buble, especially in housing prices. When this bubble popped, people could not pay back their loans.
The debt loaned out but not repaid is now rolling uphill like a reverse avalance, tracking back to the people who have loaned money, but can't get it back.
The top of this hill, the ultimate lender, is the Fed and Treasury. Eventually, the debts will go back to them, since the money for the original loans is fiat money created by the Treasury.
Fair question - my understanding is that the reasons are so complex no one but experts really understand.
The SEC (Securities & Exchange Commission) is definitely partially responsible for this volatility and drop in the stock market. They have done a terrible job and need to be reprimanded loud and clear.
1) In July 2007 they (the SEC) got rid of the Uptick rule regulating short sellers which had been in place since 1938 because of short selling bear raids during the Great Depression. Since the Uptick rule was taken out, the volatility on the stock market has increased by 70% as measured by the VIX Index.
2) In November 2007 they got rid of the Program Trading curbs that had been in place since the 1987 stock market crash.
3) The SEC has not stopped the abusive and criminal practice of Naked Short Selling, which is the same as counterfeiting shares of publically traded stock.
These are three major problems that NEED TO BE FIXED IMMEDIATELY BY THE SEC. The results have been a massive amount of increased volatility and instability in the equity markets, reducing the net worth for American investors, driving companies out of business, and substantially raising the cost of capital.
Because the SEC is regulated by the Senate Banking Committee, it is time to write letters to every U.S. Senator sitting on this committee demanding the Uptick Rule and Program Trading curbs be reinstated, and the criminal practice of Naked Short Selling be stopped once and for all.
Here’s a list of U.S. Senators on the Senate Banking Committee. When enough people send them letters, I guarantee you things will change at the SEC - and some heads there should definitely roll for their gross incompetence.
http://banking.senate.gov/public/index.cfm?FuseAction=Information.Membership