are we heading for another stock market crash?

Question

first time one of my questions made it onto best questions on the front page

Answer 1

Not really, although there is always that possibility. Although America is struggling the other economies are staying relatively stable.

Congratulations on your question getting on the Front Page though!

Answer 2

By their very nature, the timing of stock market "crashes" cannot be anticipated. However, every time the market corrects, there is a chance of a crash. That's why people pull back. They are now faced with the real possibility of a crash.

We are, indeed, in trouble. We are facing a classic liquidity crisis with a Fed that wants to re-establish discipline in the markets. The banking system is not as threatened as the "fund" system. We have many hedge funds, mutual funds, pension funds, etc. that invested poorly in credit instruments that they thought were less risky than they actually are. They will lose money.

But will these losses lead to a crash. For a true crash, we need a real banking crisis. No one should be willing or able to lend money. Bernanke seems well on his way to insuring that, so I put the probability of a crash higher than its been in decades. Nonetheless that probability remains low.

SO, nibble but don't overextend.

Good luck.

Answer 3

I'm sure it is heading for a stock market crash and also a housing crash. All the prices have gone up and housing prices are unimaginable but the jobs are going out and we get a annual incrase of 3%. In another 10 years US unemployment rate would be wrost. I think other countries would get richer and US would get poor. Countries like China and India is taking all of US jobs and money which we will never get it back. When they learn the lesson it will be too late to correct it and it will be like 1930 crash and every damn country in the world would laugh at US. Fed needs to do something to stop right now the mess. I think soon banks are going to announce that they have no money to lend and may file bankruptcy and that is the end of the story.

Answer 4

The big crashes I remember were in 1987 and 2000-2003. In 1987-1988 I was at university. I did an essay in 1988 regarding the impact of the "big bang" on the stock market crash in October 1987.

The "big bang" was a change in the way that stocks and shares were traded. Effectively it became all electronic overnight, and the days of jobbers and brokers waving contracts on the stock exchange became obsolete.

My conclusion at the time was that the crash was exaggerated by the effect of programmed dealing which caused large sell offs when the fall began. In other words people were selling in order to stop losses. This was automatic, and could not be blocked by brokers too busy to take your phone call.

The crash from 2000-2003 was a more painful, drawn out process, in which many large companies around the world became small companies. Worldcom, Enron, and many new technology companies had their value almost completely wiped over that period. Some insurers lost enormous value in their shares, the most notable in the UK were Prudential, RSA and Zurich. (listed in Switzerland) Of course this might have had something to do with September 11 2001, but the coincident timing of the uncovering of fraud at Enron in October 2001 makes me very suspicious of accountants.

Currently, the FTSE-100 is almost back at the level it was in the year 2000. This is not sufficient in itself to suggest over value. One must compare earnings, assets, and how that translates into likely future dividends and earning growth.

Lack of demand can cause a crash. Jittery investors, looking to transfer money into safe havens away from equities. The money will not be piling into property. Prime commercial property already appears to be on the down slide.

If there is a crash where will all the un-invested money go?

Legal and General recently bought back a significant amount of its own shares. This is a sign that Legal and General cannot find anywhere to put excess capital other than paying off it's equity debtors.

If value is difficult to find money will be used to repay debts. Gearing will fall, and consequently money supply in the business economy will contract.

A correction to the market prices may be about to occur, however I do not think it will be uniform across all shares and sectors. Some will be hit harder than others.

Generally, in theses circumstances the safe havens in equities are energy providers, water suppliers, and supermarkets.

When a crash occurs, people lose sight of value. This is when you pile money in when you find cheap stock!

NB. The FTSE-100 is down 12% from its recent high at 16 August 2007. A 25% fall would take it to about 5050. A 50% fall would take it to 3400, which is around the level it was in 2003 when war began in Iraq. I suspect it may fall to this level unless the troops are withdrawn soon!

Answer 5

YES!!

Just like the stock market crash from 2000-2003. People kept buying thinking the market would go back up. Many of those stocks never went up to the 2000 level ever again.

Answer 6

It's bad news if you're wanting to sell or have shares but will be good if you're looking to buy. Personally I think things will get worse before they get better, so I'd hang on in there for a few more days and see what'll happen, there have been alot of red on the lists and further drops today, it's all because of lenders tightening the borrowing strategy and interest rates going up which has led to this. This will put more people into deeper debt or inability to pay and encourage/increase Iva's, bankruptcies and house repossessions. This is all due to irresponsible lenders! They were keen to throw money at borrowers at any cost now they realise their mistakes and have put a halt to it, or so they would have us believe, they will tweek the figures to lend money to slightly at risk borrowers at a higher rate of course and then when interests rates rise, people can't pay back. So then they shut the stable doors after the horse had bolted! So to speak. We are following the American route to stop bankcrupties and make people pay back at 0% interest instead. This will stop people borrowing for at least 7 years and probably leave lenders twiddling their thumbs waiting for borrowers to return. Wish people wouldn't borrow then their would be no debt or greedy lenders to contend with. My motto is don't buy if you haven't the money to pay for it. It's ok having one debt ie a mortgage, but people have too many irons in the fire these days and borrow to pay for the borrrowing. - bad route. Sorry for the rant!

Answer 7

in 1975 when oil prices went up the stock market crashed again on black Wednesday and a big fall 2003. it takes one crisis only and it can crash, that is why so many pension providers have gone almost to the edge of disaster, yes it will rise again but never at the speed it can fall

Answer 8

By its` very nature, the stock market goes up and down all the time.The secret is (if you want to stay solvent), buy when prices are down and sell when they are high. A few types of commodities may `drop` but I do not believe there will be a crash.

Answer 9

No crash is a Crash if the time can rebuild it. It is a correction and an opprtunities to buy for the investment (not to trade).
Black night is as important as a sunny days. So dont panic. Every dip is an opprtunities. Buy value stocks and hold for long term horizon. you will be wealthy. Good Luck.

Answer 10

A 1929 type crash is incredibly much impossible with the aid of fact many stuff have replaced since then. Many experts will inform you that the 1929 crash occurred specifically with the aid of fact human beings have been allowed to borrow as much as 9 circumstances their unique investments. Now the fee is barely 2-a million.

Answer 11

yes we are an the main cause of it is humanities greed an cravings for more all the time what happend to the old ways an wants of humans like if you couldent afford it you did without like i do without the stock market etc because as i see it its only another money making scam because when it crashes only the small an poor investers lose everything