Whats going on with the stock market right now?

Question

Have been reading and researching about stock market this summer, and am having a hard time finding out why exactly the market has been so unstable lately?

Answer 1

Homes were bought by average people for above average prices by using "sub-prime" mortgage lenders. These lenders were backed by money from Chinese business investors.

Now that the contacted lending rate is going up, these people can not afford to keep their homes and pay the new (higher) rates.

In effect, homes aren't being sold as quickly, and houses are going on the market more often. They bought their home during a seller's market, and now they have to sell their homes during a buyer's market.

The inflated prices which original buyers paid aren't there right now, so the Seller is losing the inflated amount as well, and they must pay for it somehow, because they can't get it through the sale of their house. Now, these people are not only losing their home, but will still owe the inflated amount of money they borrowed above the current cost of their home.

This trickles down to the construction industry because of the loss of goods and services needed to upgrade and build homes.

That affects the stock of many companies which deal with the housing sector of the market.

This causes a large 're-adjustment' in the stock market, and that is what happened Friday.

The Federal Reserve Chairman decided not to lower the prime interest rate (amount the banks have to pay for money lent to them). By not lowering "the prime," it guaranteed that a stagnant growth would be inevitable with stocks mostly dealing with the housing market, and other stocks tied to the prime lending rate as well.

This makes it a "buyer's market" for Monday's stocks (rally), and a long-term buyer's market for houses for sale, as well.

The best thing to do is diversify your assets when buying stocks. Mutual Funds are a good investment (A Fund Manager does all the work there), and buy low, as well as sell high.

As for the housing market, read the contract before buying a home. If your monthly mortage rate is going to go up when the prime lending rate goes up, and you can't afford that, then don't get into an ARM (Adjustable Mortgage Rate). Instead, get a Fixed interest rate that you can afford, and you won't have to worry about the prime.

Answer 2

stability in the markets means that most of the money agrees on the direction and speed at which the markets ought to be moving.

instability then means the money doesn't agree.

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without bashing folk too hard, many bone headed decisions were made in the housing markets over the past 5 years. houses were 'bought' for unrealistic prices. they were financed with far too small down payments, given that the prices were unrealistic. second and third properties were financed without significant down payments. and flexible interest rate loans were awarded to people who had no financial flexibility -- who couldn't really pay any more.

best guess i've seen so far is that 'sub-prime' mortgages may prove to have been a 150 billion to 200 billion loss.

there'll be losses, like only 1/3 that size or so, in non documented loans ['liar loans'] as well.

however, it looks like the Federal Reserve is determined to keep this thing under control. And 200 or even 300 billion isn't at lot when the US economy's total estimated net worth is 60 trillion or so -- 1/2 of 1 percent.

yes ... things have to work out. yes ... it will take time.
no .. this isn't the end of the financial world.

Btw, imho, (and as usual) the voices and 'solutions' you're hearing from Congress are all hot air. Most of them haven't a clue as to the real issues and are only trying to make positive press for themselves. In fact, if you've read this far and understand what I've said, you now know more than they do. (again).


GL

Answer 3

The reason being there are mixed messages coming from different places. From one side, the economy seems to be doing good: unemployment is low, inventories are low, interests rates are still low, etc. On the other hand, there's this defaulting mortgages issues. Since the markets don't fully understand how big the problem is, then it acts erratically. Once more numbers come on mortgage defaults and the exposure of the banks to those loans, only then the markets will fully discount hose risks and prices will tend to stabilize.

Answer 4

A inventory marketplace or fairness marketplace is a public entity (a loose community of financial transactions, no longer a actual facility or discrete entity) for the paying for and merchandising of business company inventory (shares) and derivatives at an agreed cost; those are securities listed on a inventory replace besides as those basically traded privately. The Sensex is an "index". what's an index? An index is incredibly a trademark. It provides you a common thought approximately no rely if most of the shares have long gone up or most of the shares have long gone down. The Sensex is a trademark of each and every of the main businesses of the BSE. The Nifty is a trademark of each and every of the main businesses of the NSE.

Answer 5

It's because a lot of banks and other financial companies made boneheaded "teaser rate" ARM mortgage loans to a bunch of people who didn't understand them. The "teaser rate" goes away after a few years, and the people who now have to pay real world rates can't afford the new monthly payment. This means the lenders don't get paid. This means their bottom line drops. So their stock price is going to go down too.

Answer 6

In other words, the conservatives, in their blind greed, failed to regulate a large segment of the financial industry in a reasonable way. Now we reap the predictable outcome. We are standing at the gates of perdition, and some greedy jerks are about to get their just deserts. The sad part is that some good hard working people will also suffer badly. A classic problem with modern conservatism. I hope people will see the truth this time.

Answer 7

read my daily analysis at http://sharemarketcomments.blogspot.com

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