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To: ARCADIA

Basically it is a slow collapse vs say, a fast crash.

Stocks are liquid. If people panic, they can sell their stocks very quickly, leading to a stock market crash.

Houses are very illiquid. It takes weeks or even months for a seller to finally accept a buyers bid, if a buyer ever does bid. If not, the seller must keep dropping his asking price until he finally sells. Because houses are illiquid, housing markets don’t so much “crash” like stock markets, as they unwind. They just spiral down over time.

The liquidity crisis we are in has the same effect on bank losses and bankruptcies. Banks don’t fail all at once. They are hiding their losses and trying to keep those debts from being called, keep from having to pay them all at once. They are raising capital and selling stock. So bank collapses, like housing, tends not to crash but to unwind.

There are way better financial people here at FR than me, so maybe this explanation misstates the term “unwind”. But that is the rough meaning of the term as I understand it. Hopefully you will get a more clear, more comprehensive definition from one of our exceptional financially trained Freepers. I thought I would take a shot at it, though... I don’t think I’ve missed the mark by too far.


264 posted on 09/15/2008 9:21:56 PM PDT by Freedom_Is_Not_Free
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To: Freedom_Is_Not_Free
The problem with the Bear Sterns bailout is they just gave the money away to their pals.

Thanks - I think I understand - unwind means the slow process of getting rid of hard-to-sell (not liquid) assets. And, yes, isn't FR grand - some Freepers are so knowledgeable. This is best site for this type of info as well as military info.

Now, if they would only stop obsessing about the election, and contribute to the fin threads! On a day like this, the Freepers should all over the crisis.

288 posted on 09/15/2008 11:23:19 PM PDT by ARCADIA (Abuse of power comes as no surprise)
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