Are we in the middle of a financial meltdown?

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So if you had savings tried into the stock markets (so the sum is higher the better the stock market is) which you were in the process of withdrawing would you be looking to prevent there release until this current issues have lessened (by all accounts the bill will be passed in some form but it will take a few days at least to redraft?)?

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(by all accounts the bill will be passed in some form but it will take a few days at least to redraft?)?

This is a dry run. If the markets look like surviving over the next 3-4 days they may abandon the plan altogether. Problem is that it is just sooooo unpopular with the grass roots voter that it is hard for any politician be seen to 100% endorse without facing the wrath of the voters.

 

So it could come in 2 waves. The market may hold up in expectation of a 2nd draft, and this in turn may stop the 2nd draft happening at all, and once it gets pulled we then see the "real" fall.

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Eight years ago: -- President Clinton announced that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping 1999's record surplus of $122.7 billion.

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EU markets are quite stable this morning... please God they'll hold their nerve and this madness will stop - it's essentially pure fear that is propelling the markets downwards rather than fundamentals , come on folks - pull heads out of asses time!

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But the way things are the slightest rumor or little bit of bad news and the markets go down.

 

What are the fundamentals? It's all based on emotions and false optimism/fear.

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The fundamentals are the discounted expected earnings of businesses in the future - if one accepts that luxury goods in recessionary times will take a beating that's fine but essentially retail banks with little exposure to overvalued property as per the European continent should hardly be affected.

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I was thinking about that this morning watching the markets follow each other. It really doesn't matter if one country or stock market is better positioned in it's 'real' position or not. They just follow each other plus or minus a few points. In better times that's not totally true but once the US has a problem it's panic time.

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I think that you make a fair point Pas and to a large extent what you describe has gone on - but it is not a rational way to behave - firms which have taken exaggerated risks have correctly suffered more than most - firms that were conservative - Munich Re , Allianz , Rabba bank are in remarkably strong positions for example.

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And once the dust settles I think you'll see that reflected in their stock prices. It's just at the moment few are thinking, just reacting.

 

I personally think there will be people who think, rather than react, that are currently likely to be making a huge amount of money off this crash.

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next question - they say that the market hasn't fallen this far since 2002 -

 

- what happened in 2002? I cant remember anything that bad??? And if it did fall so much in 2002, why wasn't everyone running around like headless chickens and panicking like they are now?

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The Irish government had no choice , the largest Irish bank , AIB lost 43.6% of its value yesterday on its market cap measure.

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what happens if all EU countries act to shore up their banking sectors while Congress repeatedly rejects a US solution because republicans would be unhappy with a 'socialised economy'? Surely that will lead to an enormous contraction of the US financial sector (already happening) and a flight of capital to the EU (where banks will be unerwritten and protected by their governments), China, Japan and emerging markets such as Dubai without substantial US involvement.

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next question - they say that the market hasn't fallen this far since 2002 -

 

- what happened in 2002? I cant remember anything that bad??? And if it did fall so much in 2002, why wasn't everyone running around like headless chickens and panicking like they are now?

The dot com bubble burst. I'm not expert, but I'd guess that while that wiped a lot of value off companies (most of which were massively over valued anyway) and hence the stock market, it wasn't companies like banks which are vital for the day to day functioning of the economy, hence we didn't see panic we are seeing now.

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That's right MunichMag. In 2002 there was a flight of capital from risky hi tech/biotech and dot com businesses to rock solid blue chip banking stocks. The current capital flight from banking is qualitatively different in that it will not just lead to the collapse of the banking businesses themselves but potentially also the capital markets themselves affecting all businesses that are publicly listed.

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what happens if all EU countries act to shore up their banking sectors while Congress repeatedly rejects a US solution

The US ends up dragging down everyone else? Many 'European' banks would get more than just their fingers burned if the US crumbled.

Maybe time to invest in Asian bank stock - I note, for example, that Standard Chartered's up 5% today.

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what happens if all EU countries act to shore up their banking sectors while Congress repeatedly rejects a US solution because republicans would be unhappy with a 'socialised economy'? Surely that will lead to an enormous contraction of the US financial sector (already happening) and a flight of capital to the EU (where banks will be unerwritten and protected by their governments), China, Japan and emerging markets such as Dubai without substantial US involvement.

I think what we will end up seeing is a few years of restructuring and efforts to improve balance sheets for many US financial institutions and the survivors will emerge quite strong. The Gulf region will likely continue to be a capital exporter for some time yet and while government bonds and gold are likely to be the short-term beneficiaries, there are not that many places in the world which can provide liquid enough markets to handle a cascade out of US markets.

 

A rescue plan will be passed, and any fears of a socialized economy are anyhow overblown. We have a mixed economy, and have had one for a long time now.

 

Those interested in Indian banks may want to read this article-

http://economictimes.indiatimes.com/articleshow/3544171.cms

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yes, likewise for the republican leadership. And both candidates staked their candidacy on this deal. But while a majority of the Democrats trooped out and supported the deal; the republicans by contrast defied their own president, their own leadership and their own candidate bJohn McCain to say fuck you to the whole deal and fuck you to the people of america.

Actually most of the no voters were in close reelection races and voted the way they did because they had to bend to the will of their angry constituancies. So a bad move, yes - but I think it was in line with the desires of their constitutancies - it just happens the average voter is an idiot.

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In reading through this thread i see no mention of a simlar situation experienced byThe Swedes in the early 1990's. The government got involved and according to this article it was a fairly successful action. (Hope this link functions--if not go to NY Times and search "swedish bailout")

 

On the other hand, while we are right to be mad about paying our taxes to help out a bunch of greedy mismanaged financial institutions, I am reminded of these lines from the film, "Unforgiven". (I think they were also quoted recently on "The Street"):

 

Bill Daggett: I don't deserve this… to die like this. I was building a house.

Will Munny: ''''Deserve's got nothin' to do with it.'''' [aims gun]

Little Bill Daggett: I'll see you in hell, William Munny.

Will Munny: Yeah. [fires]

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