Markets Slides another 5-9 percent again....
By ahgong
@ahgong (10064)
Singapore
October 9, 2008 2:15am CST
Looking at the various stock exchanges and the news reports of late, it seems that everyone is still panick selling their shares and stock even when there is a relief packaged being introduced to keep the market buoyant.
Some thing is just not making much sense here. And I am starting to get confused over the various news reports I read in the papers. All of them are related to over stretching of lending by the banks to the people. Due to this, the various institutions are losing money faster than they can recover them.
One
From my limited economics knowledge, when a bank loans you money for mortage, the property that you typically pledge as colleteral will belong to the bank till the day you redeem your loan.
So in effect, the banks "Buys" the property from you and you "Buy" back the property at a price that is higher than what the bank pays you. This is termed as the interest.
In the event that you default on your payments, the bank can exercise the "right" to sell your property to recover the money loaned to you.
So, if that is the case, many people default on their loans, the bank should be happily auctioning properties right?
That would bring the money back into their accounts right?
That should then not cause any bleeding of monies from the financial institutions rite?
Two
If the government is willing to put up a 700 billion dollars packages to keep the market and the stock exchange buoyant, how come there is still panic selling on the grounds?
I mean, with the funds provided by the government, it should provide some liquidity to the various institutions to keep things stable. No?
Shouldn't that restore some confidence in the market that the various financial institutions are still having some liquidity to avoid a market crash?
Then how come the markets of the various stock exchanges around the world is still facing a downward sliding trend?
Any gurus out there who are familiar with the markets to explain in laymen terms what is going on?
1 person likes this
3 responses
@applefreak (3130)
• Singapore
9 Oct 08
wow that's pretty bad isn't it? reminds me of the currency crisis in 1997. back then the market was sliding like crazy too.
one thing about property loan, the bank must be able to sell the property. now that property can fetch a decent price, there is no way the banks can recover even a fraction of the loan. i read that a woman managed to buy a home at an auction for USD0.01. yes you read correct, the house only cost her one cent. it cost money to maintain the house and the land so the owner rather give it away to stop paying for maintenance.
even if the government is bailing out the market, people will still panic sell. partly is because they'd rather cut loss than see the worth dropping like crazy. another thing is they might need the money to pay other debts. banks will call on the loan if the amount is bigger than the value of the property. that is what happened during the 1997 when so many people lost their homes.
@ahgong (10064)
• Singapore
13 Oct 08
Well, now that you mention it, it makes more sense.
No wonder these institutions need more liquid funds to be given to them to keep afloat.
Then it brings about the question, some one some where must have started the ball rolling to allow the bank of the financial institutions to stretch their monies to so many loans that now they have problems taking them back.
Shouldn't these people be made responsible for the downfall of the economy?
Shouldn't heads be rolling for this?
Then is it fair to use tax payers' money to bail these instutitions out of the rut? What is the benefit to the people who are paying the price for the mistakes of these few people who made the economy slide?
1 person likes this
@applefreak (3130)
• Singapore
13 Oct 08
well many has been asking the same questions. why are the CEOs being paid generous severance packages when they screw up? worst is when executives of companies being bailed out going on lavish corporate retreats.
yes the CEOs are taking responsibilities for the downfall of the company. but they are being paid millions of dollars for agreeing to resign. i really don't understand the logic behind this as well. hopefully the various countries will do something about this. 
1 person likes this
@chinna533 (309)
• India
10 Oct 08
its a terrible day for global market ..value of rupee was decreasing heavily . and in trade markets there is a huge fall of sensex and it was making history in back...yah i hope this damage done will be recovered as soon as possible..
@ahgong (10064)
• Singapore
10 Oct 08
I wonder with all this panick selling, prices of things will fall or not.
Part of the inflation was also because of these rising stock prices for everyday commodities like fuel and cereals.
I sure hope we will not go into a recession. Life is already miserable as it is. It is gonna be tougher if we slip into recession.
Sigh!
@poohgal (6845)
• Singapore
9 Oct 08
I only know one thing. Stock market movements are determined by expectations. When people feel positive, they invest more and when people buy more stocks, the stock prices will go up. Likewise, when people feel negative, they don't invest. Some might even withdraw out their existing investments. All these result in the stock prices going down. In economics, we call this 'Self fulfilling Prophecy'.
There are many problems with the Banking systems all over the world. It seems like many Investment banks are collapsing. Banks are not lending money to one another. I wonder how safe our money in the bank is.
Anyway, try not to put more than $20,000 in one particular bank. Our Singapore Deposit Insurance only insure up to $20,000 per bank.
1 person likes this
@ahgong (10064)
• Singapore
13 Oct 08
Yeah... I was going thru some of the older new papers when I came across the article mentioning the limit you mentioned here.
Frigging hell, we put so much money with them and they are only willing to insure us for $20,000.
Hmm... must keep this article somewhere as a constant reminder. Should I one day be able to amass that kinda savings, not to put more than that amount per account per bank!
