2 chewing gum, 2 happy
(I should post this yesterday but due to NFL game i was not able to finish it, because my voice has been heard and now people stop selling stocks at low price)
Last 2-3 days people were extremely trepidation. Like any other average joe, I’m also loosing money from my 401K, ETF portfolio and Unit linked insurance etc. Oops…that really hurts. Guys and Gals it is not end of world, don’t press the panic button. Just have 2 chewing gum, I highly recommend Trident and chew until get tired. Just kidding…trying to be sang-froid.
I agree that bankruptcy by any company is very bad but that’s not end of everything. I think short sellers utilizing this situation to make more profit. One analyst said that this is not a usual bankruptcy like airlines, this is end of capitalist. I believe he just tries to cover up his short sell.
What happens to this market is an open secret. As usual, Fed Reserve started this mess, they started tighten interest rate to cool off inflation after 4 years. Due to series of interest rate hikes, home mortgage rate went up that obviously soften housing market and things start negatively impacted to housing market. Early days only government based banks, after strict review of loan requirements, was able to provide mortgage. So low income and bad credit history people can not get any loan but now due to market reform, any bank can give mortgage, which fuels heavy competition and various loan schemes such as adjustable rate, interest only, are created.
This high risk loans were bundled up to create mortgage based bonds and sold thru market which usually gives high yield than traditional bonds. After 5 years, this subprime and ARM interest rates went up that obviously the reason for defaults and foreclosures.
Now government’s backed off from Lehman’s bail out is showed that there are several more mess out there. Until Friday evening, nobody knows that Merrill also in trouble and AIG. There is some more negative news we have to deal with, I guess.
Even though we are very negative side of this mess, here are some positive points
1. There are millions of millions of people around the world able to find their sweet home because of this sub prime. Even though some of them filling foreclose, most of them able to keep their home, and working hard to keep up the interest rate.
2. This was the real test of market, banks and brokerage firms withstand this fall are great place to invest and get prosperous.
3. This is really a chance for us to revisit our beliefs that too much competition is good for consumers. But here both consumers and company affected a lot.
4. Inflation now becomes history and oil price coming down very faster than expected.
5. People like McCain will not buy more than 1 or 2 house, which would save some trees, it make some green concerned people happy.
As a note, it is very emotional that a company’s headquarters destroyed in Sep 11, 2001 attack but survived but not able to make it till the end.
Source :
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1812
http://www.iht.com/articles/ap/2008/09/15/business/NA-US-Lehman-Brothers-Profile.php
http://money.cnn.com/2008/09/16/news/companies/barclays_lehman.ap/index.htm?postversion=2008091617
Last 2-3 days people were extremely trepidation. Like any other average joe, I’m also loosing money from my 401K, ETF portfolio and Unit linked insurance etc. Oops…that really hurts. Guys and Gals it is not end of world, don’t press the panic button. Just have 2 chewing gum, I highly recommend Trident and chew until get tired. Just kidding…trying to be sang-froid.
I agree that bankruptcy by any company is very bad but that’s not end of everything. I think short sellers utilizing this situation to make more profit. One analyst said that this is not a usual bankruptcy like airlines, this is end of capitalist. I believe he just tries to cover up his short sell.
What happens to this market is an open secret. As usual, Fed Reserve started this mess, they started tighten interest rate to cool off inflation after 4 years. Due to series of interest rate hikes, home mortgage rate went up that obviously soften housing market and things start negatively impacted to housing market. Early days only government based banks, after strict review of loan requirements, was able to provide mortgage. So low income and bad credit history people can not get any loan but now due to market reform, any bank can give mortgage, which fuels heavy competition and various loan schemes such as adjustable rate, interest only, are created.
This high risk loans were bundled up to create mortgage based bonds and sold thru market which usually gives high yield than traditional bonds. After 5 years, this subprime and ARM interest rates went up that obviously the reason for defaults and foreclosures.
Now government’s backed off from Lehman’s bail out is showed that there are several more mess out there. Until Friday evening, nobody knows that Merrill also in trouble and AIG. There is some more negative news we have to deal with, I guess.
Even though we are very negative side of this mess, here are some positive points
1. There are millions of millions of people around the world able to find their sweet home because of this sub prime. Even though some of them filling foreclose, most of them able to keep their home, and working hard to keep up the interest rate.
2. This was the real test of market, banks and brokerage firms withstand this fall are great place to invest and get prosperous.
3. This is really a chance for us to revisit our beliefs that too much competition is good for consumers. But here both consumers and company affected a lot.
4. Inflation now becomes history and oil price coming down very faster than expected.
5. People like McCain will not buy more than 1 or 2 house, which would save some trees, it make some green concerned people happy.
As a note, it is very emotional that a company’s headquarters destroyed in Sep 11, 2001 attack but survived but not able to make it till the end.
Source :
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1812
http://www.iht.com/articles/ap/2008/09/15/business/NA-US-Lehman-Brothers-Profile.php
http://money.cnn.com/2008/09/16/news/companies/barclays_lehman.ap/index.htm?postversion=2008091617
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