Financial Meltdown Coming?
- Thread starter lawpoke87
- Start date
The one thing I have been worried about has been the Fed presidents being reluctant to attempt even a modest rate decrease yet as a sign that they are tempering their artificial slowdown of the economy. The reports they depend on are all lagging indicators of economic health, and they may end up acting later than they needed to in order to keep the economy healthy.
I was reading on a more wonky site that a lot of the current turmoil has to do with Japan raising its interest rates and pretty much nothing to do with market fundamentals in the US. Japan's interest rates were near zero, and it was apparently a common practice to borrow money cheaply in Yen, and then invest it in higher yielding assets. Margins are slim, so as soon as the central bank raised interest rates in Japan and the Yen surged in strength, the scheme became unviable. Large institutional investors across the globe are now unwinding their investments simultaneously and covering, causing a massive sell-off.
Not saying it won't turn into a broader contagion that could start to collapse the markets; it could. But it appears the immediate downturn is (as usual) due to large scale investment into esoteric financial schemes to make a quick buck, and then being caught flat-footed when the environment changed and made those schemes unviable. Not due to any panic over what US politicians may or may not attempt to do in a year or more time. And not due to normal fluctuations in the US employment rate (which remains historically low). *
It could also be a short-term sell-off that the world collectively shrugs off once the unwinding is complete. I'm no market guru insider; I have no idea how exposed the world is to this mess.
*I realize lawpoke didn't assert this, but certain US politicians and pundits have, and so it seemed worth mentioning.
Not saying it won't turn into a broader contagion that could start to collapse the markets; it could. But it appears the immediate downturn is (as usual) due to large scale investment into esoteric financial schemes to make a quick buck, and then being caught flat-footed when the environment changed and made those schemes unviable. Not due to any panic over what US politicians may or may not attempt to do in a year or more time. And not due to normal fluctuations in the US employment rate (which remains historically low). *
It could also be a short-term sell-off that the world collectively shrugs off once the unwinding is complete. I'm no market guru insider; I have no idea how exposed the world is to this mess.
*I realize lawpoke didn't assert this, but certain US politicians and pundits have, and so it seemed worth mentioning.
I viewed the sell off as the market doing what the market does at times…panicking over a potential economic slowdown. Market is back up today which means there’s support at the 39k level. Good news all around imo. Hopefully we can maintain these levels the rest of the week and avoid any major correction.
Japan has fundemental issues in their financial system totally unrelated to the U.S. as Clong indicated.
Japan has fundemental issues in their financial system totally unrelated to the U.S. as Clong indicated.
Japan makes stuff the world wants. Unlike the Saudis and arabs, The literally only have oil. That goes away, and they have zero to offer the world except sand and bitching about Israelis.
The japs make Complicated stuff. Cars, jet planes, computers, software etc… They are a brilliant people. Their problems lie in demographics. It is actually pretty cheap to live in Tokyo. It is one of the cheaper large cities to live in the world. Their markets are back up big today. Trends are the friend. the carry trade stuff was interesting. Buffet had been putting money into Japan recently. I wonder if he had got out before this recent crisis.
