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sandytheprincess | Can you explain the reason behind the recent stock market crash? |
Please explainm the US federal reserve's announcement to cut the rates. what is 75 basis points? |
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planetmatt
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Most adjustments to interest rates are made in increments of 0.25% The Fed's latest adjustments is 0.75% which in a single action hasn't happened since the early 80's.
The purpose of the rate reduction is to try and encourage spending as the US government foolishly believe that they can spend their way out of the latest crisis.
The reason for the market reduction or crash depending on your perspective is twofold.
One, the sub prime mess caused by irresponsible US lenders who lent mortgages to people who really shouldn't have had a mortgage. Once the cheap interest introductory offer ran out, these people found they could not afford their homes and defaulted on their payments. Unfortunately, these bad loans had been repackaged and sold on to other financial institutions and amazingly, these companies don't actually know how many bad loans they have. As they are not able to accurately know their financial liability, they have stopped lending to each other reducing the amount of liquidity in the system and making it difficult for companies or individuals to get credit and thus spend.
Two, the US government has been spending wildly on defense and running up the national debt. Basically, when they need more money,they print it. By printing more money and not having it pegged to a commodity of real value like Gold, the dollar has been devalued and consequently buys less resulting in prices going up which in turn squeezes consumers. Gas isn't going up because the oil costs more, it's going up because your dollar is worth less than it was last year. |
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sandevyl
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Many factors. One, there is a change in the global investment climate. One of the primary triggers is the huge fear of the United States' economy going into a recession with foreign institutional investors trying to reallocate their funds from risky emerging markets to stable developed markets. Analysts are now expecting a cut in US interest rates.
Hedge funds and FIIs could have been the biggest sellers in the Indian markets, booking profits and making the most of the unprecedented bull run that has dominated the Indian stock market for a long time now.
The current volatility is also linked to global bourses. There is a big correlation among global markets. The presence of hedge funds across asset classes, along with increased global movement of capital, has increased event-related volatility.
Volatility in commodities markets has also significantly affected equity markets. |
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Pure Star
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This is the bottom of the 20 year financial cycle. Last big stockmarket crash was 1987. Evrything will be on the upswing over the next ten years and then start sliding in the following ten years ending with a crash. Not surprising those who have been around long enough or studying economic history. |
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sameer_raj
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first economic crisis in US market
second morgan stainley ,citibank facing heavy loss
third foreign investors took out their money from stock market as they feared
n lot more let us get more answer thanks 4 2 pnts |
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Sage
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A basis point is one hundredth of a percentage point as stated like this.....0.01% Therefore, 75 basis points would be 3/4 of a percentage point or .75 %
The reason behind the recent stock market pullback (I wouldn't call it a crash) is because investors sometimes panic and in this case they are worried about the assets of certain companies in the financial sector concerning their mortgage assests such as CDO's etc. People are afraid that companies will lose a lot of money and thus this could slow the economy. The federal reserve reduced rates to please Wall Street, companies and the markets and at the same time lower the cost of cetain types of borrowed money with the hope that this will stimulate the economy. Nothing to worry about unless you are planning to retire soon and all your money is in the market. If that is the case then you should make some strategy adjustments to your portfolio or talk to someone you trust about financial matters. For younger investors, just sit back and relax. This will pass in time and business as usual will continue. It's all part of the ups and downs of the market. It would be too easy if everything just went straight up all the time. Where's the challenge in that? |
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Brad H
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Sure, the US is a country whose business engine is credit and credit is drying up. America's past sins of consumers living a lie through spending money they don't have is now a barking dog at their feet. USA, the richest country in the world...hardly...approaching 10 trillion in debt load. The federal reserve ruined this country, essentially we have been printing money that is not backed up by gold bullion. So, the dollar is in the toilet all over the world. The world is wise to America's lies and the Jews are mostly responsible for the financial mess. Sub Prime loans or what I prefer to call "sub crime loans" have added greatly to the problem but all Americans have to share the blame....greed is the demon. The rich have become richer and every day the middle class seems more of a thing of the past. The "New America" is working 55-60 hours a week for meager existence. As far as the fed lowering the rates this is the rate the fed charges to banks or the prime rate, .75 basis points is 3/4 of one interest rate point. Expect a .25 to trickle down to consumer mortgage lending...may take a month or so. It's about time God makes us pay atonement for our past sins...let's hope a new President will change the course of world perception of the late, great USA. If I were you I would work on getting a year's supply of canned goods, you know, beans, soup etc. Good luck, there will be stormy weather ahead for at least two years. If a war monger gets elected the radical Muslim faction will attack on our home shores and hundreds of thousands will die, there is no security, period. No one is safe, Homeland Security is a fable. |
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Sunny San San
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I think you should know the followings.
1) stock shares just has its nominal value only. For instance, Many China corps issued new stocks in the markets there was a small description or indication of 50 times or 100 times exceeded its real value.
2) Stock market is not just sort of pooling like lottery tickets. You investors are gambling the numbering games. There are lots of gambling in stock markets, such as common shares, warrant shares, preferre shares, margin investments, etc. These gambling make many losers life in Hong Kong go stale. Of course quite a few become super rich. The Hong Kong government is unethical and immoral and has mad Hong Kong as the international scams of capital. However, Hong Kon government collectd more than 2,000 billion dollars taxes in horse racing, soccer games waggering, and particularly the duty tax from stock market tradings. Why I hate Hong Kong government so much? Not just deliberately devised citizens addicted to gambling, they don't even provide basic pension for senior citizens. Many citizens found life is miserable in Hong Kong with the fruit fund of less than one hundred US dollars each month. Quite a few senior citizens starved to dead and quite a few had died of cold (just sbout 12 degree C). I think stock market go crash is a good news for the many poor nations, particularly the under developed countries. |
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bigb
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The recent stock market crash is attributed to the sub-prime mortgage crisis in US as well as the sell-off rally of foreign institutional investors(FII)
Let me explain you what US sub-prime mortgage crisis is then I can explain you the Fed rate cuts.
Take an example. Suppose you are living in US. You have seen for yourself a great house which is priced at say 200,000 dollars. now since you don't have such liquid money at a go, you buy that house on a mortgage, similar to home loan system in India wherein you pay monthly installments of some dollar amount. Now since inflation in US and greater taxes already add to the burden of local people's expenses, most of them couldn't afford to pay back the mortgage and this has resulted in crisis. Also, it is said that every American has at least 3 credit cards. Now, What Americans do? If they cant pay the bill of the first credit card, that apply for a second one and pay their first credit card bill through the second one. This also has led to further crisis in US which may trigger or I can say it is going to trigger another recession in their economy.
Now how did this crisis affect the Indian Stock market? Simple. Most of the American banks which have given out mortgages and credit cards have also invested in Indian stock markets as FII's. Now since they are facing a cash crunch there in US, they decided to sell off all their investments here to raise money and give some relief to their cash crunch. This led to a massive downfall in our stock markets.
In financial calculations, 100 basis points = 1 percentage point or in simple terms 1 percent. therefore 75 basis points means 0.75 percent. The US fed has made announcement in Rate cuts so that the people who couldn't afford to pay back their mortgages now have a chance to pay them back at a lower rate, thus easing their burden and at least creating hope that there would be some relief to the cash crunch they are facing. |
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counselor
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More sellers and less buyers.
I am not sure may be point .75% |
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