This is an article from the Star business section dated 19 March 2008, regarding the fire sale of Bear Stearns to JP morgan (Lol! I know you can read, I'm just rehashing..)
Well for me this is a big SHOCK! Why? because from my humble point of view, this is like a major nail in the coffin that is US' economy.
The US market, from my observation:
- is bearish(i.e. there is a general sentiment that the markets will be on the decline.),
- has a rising inflation rate(prices of essentials increase more than income),
- US dollar weakening(which would lead to a whole myriad of effects, which I need a whole other post to discuss!
- Campaigning for new president ongoing, not knowing how the transition of leadership would be...
The run on effect from the collapse of such a major institution would have an adverse impact on other banks which would lead to a credit crunch as can be seen by "interbank lending halted".
This would affect the market as credit would not be created and spending will ground to a stand still which would lead to a stagnation of the economy and which will go round and round in a vicious cycle.
In terms of socio-economic-political stability, the US is not looking too good on its feet at the moment.... For years Mr Warren Buffet has been predicting that the US bubble would burst and come crumbling down as it was way too much in debt, and while the problem was not really caused by debt, but instead of bad leveraging of bad underlying securities and giving out bad credit, this has had a run on effect on everything else.
So... What's my point?! Hmm... with the current weak USD, I'd say... Go on a holiday to new york! LA! Hollywood! Disneyland! And grab a few pairs of Levi's and Fossil watches for arbitrage profit! =D
No comments:
Post a Comment