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Investors seem, above all, to be in a state of shock, bludgeoned into paralysis by the market`s astonishing volatility. How is Theodore Aronson, partner at Aronson + Johnson + Ortiz LP, a Philadelphia money manager overseeing some $15 billion, holding up in the bear market? "We have 101 clients and almost as many consultants representing them," he says, "and we`ve had virtually no calls, only a handful." Most of the financial planners I have spoken with around the country have told me much the same thing: Their phones are not ringing, and very few of their clients have even asked for reassurance. The entire nation, it seems, is in the grip of what psychologists call "the disposition effect," or an inability to confront financial losses. The natural way to palliate the pain of losing money is by refusing to recognize exactly how badly your portfolio has been damaged. A few weeks ago, investors were gasping; now, en masse, they seem to have gone numb.
The market`s latest frame of mind seems reminiscent of a passage from Emily Dickinson`s poem "After Great Pain a Formal Feeling Comes":
This is the Hour of Lead --
Remembered, if outlived,
As Freezing persons recollect the Snow --
First -- Chill -- then Stupor -- then the letting go.
This collective stupor may very likely be the last stage before many investors finally let go -- the phase of market psychology that veteran traders call "capitulation." Stupor prevents rash action, keeping many long-term investors from bailing out near the bottom. When, however, it breaks and many investors finally do let go, the market will finally be ready to rise again. No one can spot capitulation before it sets in. But it may not be far off now. Investors who have, as Graham put it, either the enterprise or the money to invest now, somewhere near the bottom, are likely to prevail over those who wait for the bottom and miss it.
By JASON ZWEIG
...
In reply to:
What is a share market?
Posted by :
sambala
The Graham P/E has not been this low since January 1989; the long-term average in Prof. Shiller`s database, which goes back to 1881, is 16.3 times earnings.
But when the stock market moves away from historical norms, it tends to overshoot. The modern low on the Graham P/E was 6.6 in July and August of 1982, and it has sunk below 10 for several long stretches since World War II -- most recently, from 1977 through 1984. It would take a bottom of about 600 on the S&P 500 to take the current Graham P/E down to 10. That`s roughly a 30% drop from last week`s levels; an equivalent drop would take the Dow below 6000.
Could the market really overshoot that far on the downside? "That`s a serious possibility, because it`s done it before," says Prof. Shiller. "It strikes me that it might go down a lot more" from current levels.
In order to trade at a Graham P/E as bad as the 1982 low, the S&P 500 would have to fall to roughly 400, more than a 50% slide from where it is today. A similar drop in the Dow would hit bottom somewhere around 4000.
Prof. Shiller is not actually predicting any such thing, of course. "We`re dealing with fundamental and profound uncertainties," he says. "We can`t quantify anything. I really don`t want to make predictions, so this is nothing but an intuition." But Prof. Shiller is hardly a crank. In his book "Irrational Exuberance," published at the very crest of the Internet bubble in early 2000, he forecast the crash of Nasdaq. The second edition of the book, in 2005, insisted (at a time when few other pundits took such a view) that residential real estate was wildly overvalued.
The professor`s reluctance to make a formal forecast should steer us all away from what we cannot possibly know for certain -- the future -- and toward the few things investors can be confident about at this very moment.
Strikingly, today`s conditions bear quite a close resemblance to what Graham described in the abyss of the Great Depression. Regardless of how much further it might (or might not) drop, the stock market now abounds with so many bargains it`s hard to avoid stepping on them. Out of 9,194 stocks tracked by Standard & Poor`s Compustat research service, 3,518 are now trading at less than eight times their earnings over the past year -- or at levels less than half the long-term average valuation of the stock market as a whole. Nearly one in 10, or 876 stocks, trade below the value of their per-share holdings of cash -- an even greater proportion than Graham found in 1932. Charles Schwab Corp., to name one example, holds $27.8 billion in cash and has a total stock-market value of $21 billion.
Those numbers testify to the wholesale destruction of the stock market`s faith in the future. And, as Graham wrote in 1932, "In all probability [the stock market] is wrong, as it always has been wrong in its major judgments of the future."
In fact, the market is probably wrong again in its obsession over whether this decline will turn into a cataclysmic collapse. Eugene White, an economics professor at Rutgers University who is an expert on the crash of 1929 and its aftermath, thinks that the only real similarity between today`s climate and the Great Depression is that, once again, "the market is moving on fear, not facts." As bumbling as its response so far may seem, the government`s actions in 2008 are "way different" from the hands-off mentality of the Hoover administration and the rigid detachment of the Federal Reserve in 1929 through 1932. "Policymakers are making much wiser decisions," says Prof. White, "and we are moving in the right direction."
Cont.....
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The Graham P/E has not been this low since January 1989; the long-term average in Prof. Shiller`s database, which goes back to 1881, is 16.3 times earnings.
But when the stock market moves away from historical norms, it tends to overshoot. The modern low on the Graham P/E was 6.6 in July and August of 1982, and it has sunk below 10 for several long stretches since World War II -- most recently, from 1977 through 1984. It would take a bottom of about 600 on the S&P 500 to take the current Graham P/E down to 10. That`s roughly a 30% drop from last week`s levels; an equivalent drop would take the Dow below 6000.
Could the market really overshoot that far on the downside? "That`s a serious possibility, because it`s done it before," says Prof. Shiller. "It strikes me that it might go down a lot more" from current levels.
In order to trade at a Graham P/E as bad as the 1982 low, the S&P 500 would have to fall to roughly 400, more than a 50% slide from where it is today. A similar drop in the Dow would hit bottom somewhere around 4000.
Prof. Shiller is not actually predicting any such thing, of course. "We`re dealing with fundamental and profound uncertainties," he says. "We can`t quantify anything. I really don`t want to make predictions, so this is nothing but an intuition." But Prof. Shiller is hardly a crank. In his book "Irrational Exuberance," published at the very crest of the Internet bubble in early 2000, he forecast the crash of Nasdaq. The second edition of the book, in 2005, insisted (at a time when few other pundits took such a view) that residential real estate was wildly overvalued.
The professor`s reluctance to make a formal forecast should steer us all away from what we cannot possibly know for certain -- the future -- and toward the few things investors can be confident about at this very moment.
Strikingly, today`s conditions bear quite a close resemblance to what Graham described in the abyss of the Great Depression. Regardless of how much further it might (or might not) drop, the stock market now abounds with so many bargains it`s hard to avoid stepping on them. Out of 9,194 stocks tracked by Standard & Poor`s Compustat research service, 3,518 are now trading at less than eight times their earnings over the past year -- or at levels less than half the long-term average valuation of the stock market as a whole. Nearly one in 10, or 876 stocks, trade below the value of their per-share holdings of cash -- an even greater proportion than Graham found in 1932. Charles Schwab Corp., to name one example, holds $27.8 billion in cash and has a total stock-market value of $21 billion.
Those numbers testify to the wholesale destruction of the stock market`s faith in the future. And, as Graham wrote in 1932, "In all probability [the stock market] is wrong, as it always has been wrong in its major judgments of the future."
In fact, the market is probably wrong again in its obsession over whether this decline will turn into a cataclysmic collapse. Eugene White, an economics professor at Rutgers University who is an expert on the crash of 1929 and its aftermath, thinks that the only real similarity between today`s climate and the Great Depression is that, once again, "the market is moving on fear, not facts." As bumbling as its response so far may seem, the government`s actions in 2008 are "way different" from the hands-off mentality of the Hoover administration and the rigid detachment of the Federal Reserve in 1929 through 1932. "Policymakers are making much wiser decisions," says Prof. White, "and we are moving in the right direction."
Cont.....
...
In reply to:
What is a share market?
Posted by : sambala
What History Tells Us About the Market
The breathtakingly volatile week has left investors numb. A close study of the Great Crash, and the decades that followed, offers some unnerving context, and some reasons for optimism.
July 9, 1932 was a day Wall Street would never wish to relive. The Dow Jones Industrial Average closed at 41.63, down 91% from its level exactly three years earlier. Total trading volume that day was a meager 235,000 shares. "Brother, Can You Spare a Dime," was one of the top songs of the year. Investors everywhere winced with the pain of recognition at the patter of comedian Eddie Cantor, who sneered that his broker had told him "to buy this stock for my old age. It worked wonderfully. Within a week I was an old man!"
The nation was in the grip of what U.S. Treasury Secretary Ogden Mills called "the psychology of fear." Industrial production was down 52% in three years; corporate profits had fallen 49%. "Many businesses are better off than ever," Mr. Cantor wisecracked. "Take red ink, for instance: Who doesn`t use it?"
Banks had become so illiquid, and depositors so terrified of losing their money, that check-writing ground to a halt. Most transactions that did occur were carried out in cash. Alexander Dana Noyes, financial columnist at the New York Times, had invested in a pool of residential mortgages. He was repeatedly accosted by the ringing of his doorbell; those homeowners who could still keep their mortgages current came to Mr. Noyes to service their debts with payments of cold hard cash.
Just eight days before the Dow hit rock-bottom, the brilliant investor Benjamin Graham -- who many years later would become Warren Buffett`s personal mentor -- published "Should Rich but Losing Corporations Be Liquidated?" It was the last of a series of three incendiary articles in Forbes magazine in which Graham documented in stark detail the fact that many of America`s great corporations were now worth more dead than alive.
More than one out of every 12 companies on the New York Stock Exchange, Graham calculated, were selling for less than the value of the cash and marketable securities on their balance sheets. "Banks no longer lend directly to big corporations," he reported, but operating companies were still flush with cash -- many of them so flush that a wealthy investor could theoretically take over, empty out the cash registers and the bank accounts, and own the remaining business for free.
Graham summarized it this way: "...stocks always sell at unduly low prices after a boom collapses. As the president of the New York Stock Exchange testified, `in times like these frightened people give the United States of ours away.` Or stated differently, it happens because those with enterprise haven`t the money, and those with money haven`t the enterprise, to buy stocks when they are cheap."
After the epic bashing that stocks have taken in the past few weeks, investors can be forgiven for wondering whether they fell asleep only to emerge in the waking nightmare of July 1932 all over again. The only question worth asking seems to be: How low can it go?
Make no mistake about it; the worst-case scenario could indeed take us back to 1932 territory. But the likelihood of that scenario is very much in doubt
Robert Shiller, professor of finance at Yale University and chief economist for MacroMarkets LLC, tracks what he calls the "Graham P/E," a measure of market valuation he adapted from an observation Graham made many years ago. The Graham P/E divides the price of major U.S. stocks by their net earnings averaged over the past 10 years, adjusted for inflation. After this week`s bloodbath, the Standard & Poor`s 500-stock index is priced at 15 times earnings by the Graham-Shiller measure. That is a 25% decline since Sept. 30 alone.
Cont.....
Tracked by: 0 Boarder
What History Tells Us About the Market
The breathtakingly volatile week has left investors numb. A close study of the Great Crash, and the decades that followed, offers some unnerving context, and some reasons for optimism.
July 9, 1932 was a day Wall Street would never wish to relive. The Dow Jones Industrial Average closed at 41.63, down 91% from its level exactly three years earlier. Total trading volume that day was a meager 235,000 shares. "Brother, Can You Spare a Dime," was one of the top songs of the year. Investors everywhere winced with the pain of recognition at the patter of comedian Eddie Cantor, who sneered that his broker had told him "to buy this stock for my old age. It worked wonderfully. Within a week I was an old man!"
The nation was in the grip of what U.S. Treasury Secretary Ogden Mills called "the psychology of fear." Industrial production was down 52% in three years; corporate profits had fallen 49%. "Many businesses are better off than ever," Mr. Cantor wisecracked. "Take red ink, for instance: Who doesn`t use it?"
Banks had become so illiquid, and depositors so terrified of losing their money, that check-writing ground to a halt. Most transactions that did occur were carried out in cash. Alexander Dana Noyes, financial columnist at the New York Times, had invested in a pool of residential mortgages. He was repeatedly accosted by the ringing of his doorbell; those homeowners who could still keep their mortgages current came to Mr. Noyes to service their debts with payments of cold hard cash.
Just eight days before the Dow hit rock-bottom, the brilliant investor Benjamin Graham -- who many years later would become Warren Buffett`s personal mentor -- published "Should Rich but Losing Corporations Be Liquidated?" It was the last of a series of three incendiary articles in Forbes magazine in which Graham documented in stark detail the fact that many of America`s great corporations were now worth more dead than alive.
More than one out of every 12 companies on the New York Stock Exchange, Graham calculated, were selling for less than the value of the cash and marketable securities on their balance sheets. "Banks no longer lend directly to big corporations," he reported, but operating companies were still flush with cash -- many of them so flush that a wealthy investor could theoretically take over, empty out the cash registers and the bank accounts, and own the remaining business for free.
Graham summarized it this way: "...stocks always sell at unduly low prices after a boom collapses. As the president of the New York Stock Exchange testified, `in times like these frightened people give the United States of ours away.` Or stated differently, it happens because those with enterprise haven`t the money, and those with money haven`t the enterprise, to buy stocks when they are cheap."
After the epic bashing that stocks have taken in the past few weeks, investors can be forgiven for wondering whether they fell asleep only to emerge in the waking nightmare of July 1932 all over again. The only question worth asking seems to be: How low can it go?
Make no mistake about it; the worst-case scenario could indeed take us back to 1932 territory. But the likelihood of that scenario is very much in doubt
Robert Shiller, professor of finance at Yale University and chief economist for MacroMarkets LLC, tracks what he calls the "Graham P/E," a measure of market valuation he adapted from an observation Graham made many years ago. The Graham P/E divides the price of major U.S. stocks by their net earnings averaged over the past 10 years, adjusted for inflation. After this week`s bloodbath, the Standard & Poor`s 500-stock index is priced at 15 times earnings by the Graham-Shiller measure. That is a 25% decline since Sept. 30 alone.
Cont.....
...
In reply to:
What is a share market?
Posted by :
manojanin
What is a share market?
It is simply a fight between the bears and the bulls. Who are they? The people who have big volume of money and for them it is a game of taking something up and something down. These are all played with the money of common man and normal money earned by working hard.
No statistics ever worked. No advises ever worked. These are only imaginations that such things happen. It never happens. Only a wish of people to be get rewarded in terms of growth exists, it too never happens. When India grows at say 6% of its GDP it is really a great thing. So no one sells shares of big companies these cheap less than boll value for some don’t care about PEs. Over a long time any money grows. In share markets say a 10% of it grows beyond any imagination. How much of it is rewarded to common man is again is a few. All the great financial institution with great intelligent heads of all great schools of the world are heading a chaos. Either they are not educated at all for this purpose of these are again only imaginations. Only money follows money in that these people are mere Beggars. Only difference is they don’t beg they are chosen baggers.
World recession should affect companies doing business outside India. What about Indian companies inside India. More than 6 lakhs of people has got a salary increase of around 40% including DA and revised pay scales in September. The least net increment is around Rs.5000/- ie. Rs. 300 crores at a minimum per month into the economy from now on. The states may too start soon with its increments in 6 months to 1 year. Already more than 25000 crores of NPAs are written off in way of farm loan wavier from banks. Now CRR cut is pumping in one laksh crore from Saturday. Oil is dipping below 80 dollars will be soon below 70 because Europe and US is in to long recession and there is no demand. US dollar is at its peak so what ever we earn by way of foreign exchange is at the higher side. So a brother of ours who are NRIs who sends dollars home land is in good spirit. Reliance refinery and its oil exploration will keep the outflow of dollars decreasing gradually in the coming two years. Indian infrastructure needs a lot of expansion and thousands of crores of investment will the there. Government is getting taxes incremented by more than 30% in the coming years.
Still we are all sellers because US is selling. We are in panic because US and Europe is in panic. We are killing our Index to take the pride of our growth because world economy is in recession. We can be surplus in power, a great past negative for our energy resources, which will go after 123 agreement and we have enough CRR with in our hands with Reserve bank of India.
Still we are worried; we are worried because Europe and US are worried. Because IMF says everyone is in trouble. So are we. I look forward to Indians still in all these happenings not as mere reflections of the US and Europe physiology but as true Indians with their own. Though I know common sense is not common.
We are the future. Our banks are our future. We are all well regulated and more than that we are all pride in our conduct and we are all honest. We always try to obey a law if it is there. We, a majority of us are law abiding citizens. Come on, let us have a view of our own and see our own strength. Previously it was taken away by scams, then by FIIs at lest this time around we Indians should understand our strength. Now a rally will come and again some one else from a foreign land will make money while we keep our people at bay and creating fear in them as if all is bad and very few is right. Even if corporate growth was –ve only because the system didn’t understand there is a credit crunch. Now they know (why this late!!) still it is good. We will grow more than 8% in the coming years too.
Adding to all these what happened to the young population of the world which is in India theme. It can’t go off in a year or two!!!. It is surely a long process to be compensated. So we are here to build this world. We are the only democracy without touching any other nation living with integrity and still holding a great democracy. We are the true winners. Even if bares and bulls play, even if markets go down or up one should not panic. Because we are natural winners, as circumstances exists only in our favour. It is the destiny of India. Wee are happy that the FIIS gets some liquidity because we are here to reward them. But don’t panic. It will rest. The dust will settle in a few days. Earlier, if we have the guts, a little later, if we follow the US and Europe in sentiments.
As mob psychology behaviour the channels and analysts who taught me all of the above says we are doomed. Since these facts are solid and true we are going to see a great good growth in our economy and in our industry. Industrialists in India in majority are Industry makers not money makers. So we will build and grow. So no one should panic. Every one w
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As mob psychology behaviour the channels and analysts who taught me all of the above says we are doomed. Since these facts are solid and true we are going to see a great good growth in our economy and in our industry. Industrialists in India in majority are Industry makers not money makers. So we will build and grow. So no one should panic. Every one who wants a good return for the future should buy shares of all good companies now on, and surely for the next few days. Few months may not last, if so let it be, since we invest for a later date. So start picking and buying and be wealthy. The thump rules don’t invest if that money is needed in two years. And one should invest 20 to 50 % of their money, according to their age. The bulls will take it up as our growth is inevitable.
Common channels:-either you don’t teach us all these, having done so don’t say these much negative things to us. IF your opinion is seesaw you don’t deserves this job. We don’t need riders we want drives that drives well.
HAPPY INVESTING.
...
Tracked by: 0 Boarder
What is a share market?
It is simply a fight between the bears and the bulls. Who are they? The people who have big volume of money and for them it is a game of taking something up and something down. These are all played with the money of common man and normal money earned by working hard.
No statistics ever worked. No advises ever worked. These are only imaginations that such things happen. It never happens. Only a wish of people to be get rewarded in terms of growth exists, it too never happens. When India grows at say 6% of its GDP it is really a great thing. So no one sells shares of big companies these cheap less than boll value for some don’t care about PEs. Over a long time any money grows. In share markets say a 10% of it grows beyond any imagination. How much of it is rewarded to common man is again is a few. All the great financial institution with great intelligent heads of all great schools of the world are heading a chaos. Either they are not educated at all for this purpose of these are again only imaginations. Only money follows money in that these people are mere Beggars. Only difference is they don’t beg they are chosen baggers.
World recession should affect companies doing business outside India. What about Indian companies inside India. More than 6 lakhs of people has got a salary increase of around 40% including DA and revised pay scales in September. The least net increment is around Rs.5000/- ie. Rs. 300 crores at a minimum per month into the economy from now on. The states may too start soon with its increments in 6 months to 1 year. Already more than 25000 crores of NPAs are written off in way of farm loan wavier from banks. Now CRR cut is pumping in one laksh crore from Saturday. Oil is dipping below 80 dollars will be soon below 70 because Europe and US is in to long recession and there is no demand. US dollar is at its peak so what ever we earn by way of foreign exchange is at the higher side. So a brother of ours who are NRIs who sends dollars home land is in good spirit. Reliance refinery and its oil exploration will keep the outflow of dollars decreasing gradually in the coming two years. Indian infrastructure needs a lot of expansion and thousands of crores of investment will the there. Government is getting taxes incremented by more than 30% in the coming years.
Still we are all sellers because US is selling. We are in panic because US and Europe is in panic. We are killing our Index to take the pride of our growth because world economy is in recession. We can be surplus in power, a great past negative for our energy resources, which will go after 123 agreement and we have enough CRR with in our hands with Reserve bank of India.
Still we are worried; we are worried because Europe and US are worried. Because IMF says everyone is in trouble. So are we. I look forward to Indians still in all these happenings not as mere reflections of the US and Europe physiology but as true Indians with their own. Though I know common sense is not common.
We are the future. Our banks are our future. We are all well regulated and more than that we are all pride in our conduct and we are all honest. We always try to obey a law if it is there. We, a majority of us are law abiding citizens. Come on, let us have a view of our own and see our own strength. Previously it was taken away by scams, then by FIIs at lest this time around we Indians should understand our strength. Now a rally will come and again some one else from a foreign land will make money while we keep our people at bay and creating fear in them as if all is bad and very few is right. Even if corporate growth was –ve only because the system didn’t understand there is a credit crunch. Now they know (why this late!!) still it is good. We will grow more than 8% in the coming years too.
Adding to all these what happened to the young population of the world which is in India theme. It can’t go off in a year or two!!!. It is surely a long process to be compensated. So we are here to build this world. We are the only democracy without touching any other nation living with integrity and still holding a great democracy. We are the true winners. Even if bares and bulls play, even if markets go down or up one should not panic. Because we are natural winners, as circumstances exists only in our favour. It is the destiny of India. Wee are happy that the FIIS gets some liquidity because we are here to reward them. But don’t panic. It will rest. The dust will settle in a few days. Earlier, if we have the guts, a little later, if we follow the US and Europe in sentiments.
As mob psychology behaviour the channels and analysts who taught me all of the above says we are doomed. Since these facts are solid and true we are going to see a great good growth in our economy and in our industry. Industrialists in India in majority are Industry makers not money makers. So we will build and grow. So no one should panic. Every one w...
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Fixing credit markets could prevent a depression, but a nasty recession looks all but guaranteed. Among those expected to be most affected are retailers, who have been slashing profit forecasts, and the already beleaguered carmakers. The latter have used customer-finance to prop up sales in recent years. General Motors’ shares went into free-fall on Thursday, dropping 31% after a rating agency threatened to downgrade its debt. The once mighty firm now has a market capitalisation of just $2.7 billion.
Finance ministers of the group of seven rich countries are set to meet in Washington, DC, on Friday. The rest of the world’s finance ministers and central bankers join them this weekend for the annual meetings of the IMF and World Bank. As the damage to the real economy is becoming apparent, the challenge is to come up with a comprehensive, co-ordinated intervention that might just begin to restore confidence.
...
In reply to:
Off a cliff
Posted by : sambala
Markets in America, Asia and Europe plummet, as fears grow over financial and economic conditions
MARKETS in Asia and Europe plummeted on Friday October 10th. Japan’s stockmarket ended the week in disarray: the Nikkei 225-share index fell by 24% on the week, twice the weekly fall of the 1987 crash. It is now at five-and-a-half-year lows. Europe followed suit. London’s FTSE 100 slumped by more than 10% within minutes of opening; by mid-morning European stocks were also down, with Germany`s DAX index down by more than 8%. Amid widespread anxiety the oil price also tumbled, to around $81 a barrel, its lowest level in a year.
The falls underline that stockmarkets, traumatised by the near-paralysis in credit markets, the collapse of once-mighty banks and the prospect of global recession, are suffering what has been dubbed a “cascading crash”: a series of blows which, added together, are stomach-churning.
Wall Street is unimpressed by the TARP, America’s much-vaunted $700-billion bail-out. The Dow Jones Industrial Average had plunged by 679 points, or 7.3% on Thursday. Nor are markets reassured by a bevy of bank rescues, a co-ordinated rate cut by the world’s leading central banks, the Federal Reserve’s radical decision to buy commercial paper, Britain’s £500 billion ($861 billion) bail-out package, nor the raft of piecemeal rescues by other European governments. On Thursday the International Monetary Fund activated a procedure to offer emergency loans to threatened countries, such as Iceland, which took over its largest bank on Thursday.
In Asia, which had been relatively insulated from recent woes, panic selling set in, as markets slumped in Hong Kong, South Korea and Taiwan, among others. Indonesia`s fell by 10.4% on Wednesday before regulators suspended trading. (Equity trading was also suspended in several European exchanges, including those of Russia, Austria and Iceland.)
At the start of this latest phase of the credit crisis, Japan`s financial markets had seemed to float over the top of the global turmoil. Lehman Brothers` collapse, admittedly, had shut off the samurai market used by overseas companies to issue yen-dominated bonds, while overseas banks had trouble getting overnight funds until the Bank of Japan stepped in with assurances. Otherwise Japan`s financial markets had functioned pretty smoothly, with well-capitalised banks lending freely to each other and, in the case of Mitsubishi UFJ, one of the big three, snapping up the apparent bargain of a 21% stake in Morgan Stanley for $9 billion. (Morgan Stanley`s shares tumbled by 25% on Thursday as investors once again bet that its days as an independent firm are numbered.)
Now all hope that Japan might remain aloof is gone. Overseas hedge funds have been panic sellers of shares. Even cast-iron Japanese government bonds are being shunned in favour of cash—leaving questions about how the government is to refinance a lot of debt coming due over the next month or more. On Friday Yamato Life, a medium-sized insurer, filed for bankruptcy, the first Japanese life insurer to go under in seven years.
In America the scale of the fall is dramatic. A year ago the Dow, resilient in the face of what then seemed only a subprime-mortgage crisis, hit an all-time high of a whisker over 14,000. It is now some 40% lower, having fallen double the distance that signals a bear market. In the past seven trading days alone it has lost 21% of its value.
There is a good deal of bewilderment, as well as fear. Many had assumed that the strenuous, if belated, actions by governments to restore confidence in debt markets would bring a semblance of calm. But these efforts have so far done little to convince markets that the worst is over.
Private-sector predictions of the pain to come are getting darker by the day: Weiss Research reckons that more than 1,600 American banks and thrifts, with $3.2 trillion of assets, are at risk. AIG, an American insurer that had already needed an $85 billion loan, has tapped the Federal Reserve for a further $38 billion to keep itself liquid. And cracks have appeared in the industry’s last remaining pillars of strength as it becomes clear that big losses are coming in consumer and corporate credit as well as mortgages. There were signs on Thursday that confidence was ebbing in another relatively unscathed American titan, Wells Fargo, whose shares finished down by some 15%.
Not only are buyers of stocks conspicuously absent, but much of the selling is forced. All agree that there will be no meaningful recovery until the credit markets are unclogged. The rates at which banks lend to each other are still at or near records. The rate at which companies can borrow over short periods is starting to fall, but only slightly. Longer-term borrowing markets are still mostly shut.
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Markets in America, Asia and Europe plummet, as fears grow over financial and economic conditions
MARKETS in Asia and Europe plummeted on Friday October 10th. Japan’s stockmarket ended the week in disarray: the Nikkei 225-share index fell by 24% on the week, twice the weekly fall of the 1987 crash. It is now at five-and-a-half-year lows. Europe followed suit. London’s FTSE 100 slumped by more than 10% within minutes of opening; by mid-morning European stocks were also down, with Germany`s DAX index down by more than 8%. Amid widespread anxiety the oil price also tumbled, to around $81 a barrel, its lowest level in a year.
The falls underline that stockmarkets, traumatised by the near-paralysis in credit markets, the collapse of once-mighty banks and the prospect of global recession, are suffering what has been dubbed a “cascading crash”: a series of blows which, added together, are stomach-churning.
Wall Street is unimpressed by the TARP, America’s much-vaunted $700-billion bail-out. The Dow Jones Industrial Average had plunged by 679 points, or 7.3% on Thursday. Nor are markets reassured by a bevy of bank rescues, a co-ordinated rate cut by the world’s leading central banks, the Federal Reserve’s radical decision to buy commercial paper, Britain’s £500 billion ($861 billion) bail-out package, nor the raft of piecemeal rescues by other European governments. On Thursday the International Monetary Fund activated a procedure to offer emergency loans to threatened countries, such as Iceland, which took over its largest bank on Thursday.
In Asia, which had been relatively insulated from recent woes, panic selling set in, as markets slumped in Hong Kong, South Korea and Taiwan, among others. Indonesia`s fell by 10.4% on Wednesday before regulators suspended trading. (Equity trading was also suspended in several European exchanges, including those of Russia, Austria and Iceland.)
At the start of this latest phase of the credit crisis, Japan`s financial markets had seemed to float over the top of the global turmoil. Lehman Brothers` collapse, admittedly, had shut off the samurai market used by overseas companies to issue yen-dominated bonds, while overseas banks had trouble getting overnight funds until the Bank of Japan stepped in with assurances. Otherwise Japan`s financial markets had functioned pretty smoothly, with well-capitalised banks lending freely to each other and, in the case of Mitsubishi UFJ, one of the big three, snapping up the apparent bargain of a 21% stake in Morgan Stanley for $9 billion. (Morgan Stanley`s shares tumbled by 25% on Thursday as investors once again bet that its days as an independent firm are numbered.)
Now all hope that Japan might remain aloof is gone. Overseas hedge funds have been panic sellers of shares. Even cast-iron Japanese government bonds are being shunned in favour of cash—leaving questions about how the government is to refinance a lot of debt coming due over the next month or more. On Friday Yamato Life, a medium-sized insurer, filed for bankruptcy, the first Japanese life insurer to go under in seven years.
In America the scale of the fall is dramatic. A year ago the Dow, resilient in the face of what then seemed only a subprime-mortgage crisis, hit an all-time high of a whisker over 14,000. It is now some 40% lower, having fallen double the distance that signals a bear market. In the past seven trading days alone it has lost 21% of its value.
There is a good deal of bewilderment, as well as fear. Many had assumed that the strenuous, if belated, actions by governments to restore confidence in debt markets would bring a semblance of calm. But these efforts have so far done little to convince markets that the worst is over.
Private-sector predictions of the pain to come are getting darker by the day: Weiss Research reckons that more than 1,600 American banks and thrifts, with $3.2 trillion of assets, are at risk. AIG, an American insurer that had already needed an $85 billion loan, has tapped the Federal Reserve for a further $38 billion to keep itself liquid. And cracks have appeared in the industry’s last remaining pillars of strength as it becomes clear that big losses are coming in consumer and corporate credit as well as mortgages. There were signs on Thursday that confidence was ebbing in another relatively unscathed American titan, Wells Fargo, whose shares finished down by some 15%.
Not only are buyers of stocks conspicuously absent, but much of the selling is forced. All agree that there will be no meaningful recovery until the credit markets are unclogged. The rates at which banks lend to each other are still at or near records. The rate at which companies can borrow over short periods is starting to fall, but only slightly. Longer-term borrowing markets are still mostly shut.
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Asia Stocks Plunge This Week as Global Credit Crisis Deepens
Oct. 11 (Bloomberg) -- Asian stocks plummeted this week, sending the region`s benchmark index to its biggest weekly drop on record, as the deepening credit crisis threatened to push more companies into bankruptcy.
Mitsubishi UFJ Financial Group Inc. slumped 20 percent as Asian money-market rates climbed even as the Federal Reserve and other central banks cut borrowing costs to revive credit lending. BHP Billiton Ltd., the world`s biggest mining company, sank 8.8 percent, while Toyota Motor Corp. plunged 21 percent on concern a worldwide slowdown will hurt demand for metals and automobiles.
``It`s pure panic,`` said Ivan Tham, Singapore-based head of funds management at the state-backed Kuwait Finance House, which has about $24 billion in assets. ``You`re seeing companies start to fail because they can`t refinance. Good companies are being sold down aggressively with the bad.``
The MSCI Asia Pacific Index fell 18.7, or 17.8 percent, to 86.0. That`s the biggest weekly decline since the index was created on Dec. 31, 1987.
Japan`s Nikkei 225 Stock Average plunged 24 percent for the biggest weekly decline in its more than 50-year history. Australia`s S&P/ASX 200 Index slumped 16 percent, the biggest rout since 1992. Hong Kong`s Hang Seng Index fell 16 percent, the most since January 1998.
Singapore`s Straits Times Index declined 15 percent as the city-state sank into a recession.
`It`s Scary`
More than $6 trillion was erased from global equities this week even as central banks in China, Australia, South Korea, Taiwan and Hong Kong`s monetary authority joined a global effort to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.
``It`s scary,`` said Prasad Patkar, who helps manage $1.8 billion at Platypus Asset Management in Sydney. ``Equity markets are pricing in a very severe, deep recession as a function of people not getting credit.``
Mitsubishi UFJ fell 20 percent to 710 yen. Babcock & Brown Ltd., an infrastructure assets manager, tumbled 45 percent to A$1.01. ICICI Bank Ltd., the Indian lender with the biggest losses on overseas investments, plunged 10 percent to 504.35 rupees.
Asian money-market rates climbed as the interest-rate cuts and injections of more than $32 billion by Japan and Australia failed to unlock credit. The three-month interbank offered rate in Tokyo climbed to the highest to the highest since March 1998. Hong Kong`s three-month rate rose to the highest in a year.
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What Asian countries are most at risk of an Iceland-like debacle? The countries especially vulnerable, says S&P’s Elena Okorotchenko, who does sovereign research from the Singapore office, include Indonesia, Pakistan, the Philippines, Sri Lanka and Vietnam. S&P (which is owned by McGraw-Hill, which also owns BusinessWeek) came out with a report on Oct. 8 with the ominous title “Asia-Pacific Sovereign Report Card: As the Financial Storm Spreads, Major Uncertainties Loom.” While there aren’t any Asian countries in quite as bad shape as Iceland, the situation could get worse pretty quickly. “With the financial crisis spreading, more and more sovereigns are coming under pressure,” she says. “Nobody is completely immune.”...
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David John Marotta, president, Marotta Wealth Management, Charlottesville, Va....
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SHANGHAI, China (AP) -- Asian markets bounced back Thursday after central banks around the world slashed interest rates to ease the global credit crunch, although fears of further turmoil kept investors jittery.
South Korea, Hong Kong and Taiwan lowered their interest rates, joining a series of cuts Wednesday in the U.S., Europe and China aimed at stabilizing global markets that have plunged sharply this week.
Japan`s benchmark Nikkei 225 index was up 2.1 percent to 9,397, a day after it plummeted 9.4 percent in its biggest one-day drop since the 1987 market crash.
Hong Kong`s Hang Seng Index jumped nearly 3 percent to 15,871 after the territory cut interest rates for a second day. And a surprise rate cut in South Korea also cheered investors, who lifted the Kospi index 1.8 percent.
Mainland China`s main index was up 0.6 percent after its central bank lowered rates Wednesday evening.
China`s move came as six other central banks, including the U.S. Federal Reserve and European Central Bank, joined to lower rates to contain the spreading financial crisis. Japan`s central bank, constrained by already-low rates, said it backed the moves.
"Investors bought back shares as sentiment slightly improved on measures including coordinated rate cuts," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. Ltd. in Tokyo.
Investor reaction in Asia to the string of moves was more positive than in the U.S. and Europe, where an initial perk in markets soon dissipated amid severe stresses in lending markets and worries about a global recession.
On Wall Street, the Dow Jones industrial average ended a volatile session down 2 percent -- disappointing, but a milder decline than in previous days. U.S. stock index futures were up less than a percent, suggesting trading would open higher in New York.
European markets fell sharply Wednesday, with Britain`s FTSE 100 sliding more than 5 percent.
Wavering investors in the U.S. were gripped by anxiety again after comments Wednesday afternoon by U.S. Treasury Secretary Henry Paulson that it would be several weeks before the government`s $700 billion financial rescue package makes its first purchases of banks` troubled mortgage-backed assets.
Joining the worldwide efforts to ease the crisis, Taiwan`s Central Bank reduced its key interest rate for the second time in two weeks.
"Our economy has come under pressure for a slowdown," Governor Perng Fai-nan said. "We hope the rate cut can stimulate consumption to spur economic growth."
South Korea lowered its key rate by a quarter point to 5 percent, lifting the benchmark Korea Composite Stock Price Index 2.5 percent to 1,319.25 at midday after sinking 5.8 percent Wednesday.
In Indonesia, trading on the Jakarta Stock Exchange was canceled Thursday after the benchmark JSX index sank 10.4 percent Wednesday before trading was suspended by late morning. Authorities ordered the market to stay closed, possibly through Friday, following a late night Cabinet meeting.
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In reply to:
Asian markets rebound after global rate cuts
Posted by : sambala
Asian markets bounce back after global rate cuts, but gains capped by fears of further turmoil
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Asian markets bounce back after global rate cuts, but gains capped by fears of further turmoil
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An interesting report has come out today from the pages of bus. std. Please assess the companies involved for your selves.
Indian companies that raised large sums of foreign funds to finance growth and acquisition plans during the bull run in the stock markets are in a Catch 22 situation. The conversion price of their foreign currency convertible bonds is several times higher than their current market prices.
This leaves them with two options. One is to reset the price at current market price, a move that could dilute promoter holdings (since it would entail issuing more equity shares). The other is to redeem the bonds, which could increase debt obligations that are already substantial in some cases.
The maturity of many of the FCCBs is expected to start in October 2009 and peak in 2010-11. Most analysts say the market is unlikely to recover so significantly over the next two years that market prices will match the conversion prices.
In some cases, the outstanding amount on account of FCCBs is higher than or around the current market capitalisation of the companies concerned (see table). For instance, Hyderabad-based Subex Auzure raised 0 million (Rs 846 crore) in 2007 to finance the acquisition of Azure. The company’s market capitalisation as of September 30 was Rs 298 crore.
Should the management decide to re-set the conversion price and link it to the current market price, the company’s equity would be diluted. If it decides to repay these bonds, the redemption amount with interest would be around Rs 1,150 crore. The company has already raised debt of around Rs 1,050 crore.
The 0 million FCCB raised by pharmaceutical major Wockhardt is slated for conversion in October 2009 at Rs 629.80 against a current price of around Rs 155. If the company chooses to redeem the bonds, it will have to pay 0 million or Rs 658 crore. The company already has a debt obligation of around Rs 3,000 crore.
Firstsource, which is being put on the block by its promoters ICICI Bank, had mopped up 5 million through FCCBs, for which the conversion rate is Rs 128.60 against its current share price of around Rs 28
The outstanding amount at the time of conversion is Rs 1,292 crore against a current market capitalisation is Rs 1,222 crore. If these bonds are redeemed, the company will have to repay around Rs 1,800 crore. With debt of Rs 1,300 crore, the company will face an uphill task redeeming the bonds.
Similarly, the conversion price for companies such as Aurobindo Pharma and Ranbaxy are Rs 732 and Rs 908 against the current price of Rs 277 and Rs 255 respectively and both have significant debt obligations.
This gives a clear idea od the turn of events that is to put a hole in their balnce sheets
v.krishnamoorthy....
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Stock market is a GAMBALING sports. Is not.????????????...
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The London-based Hinduja conglomerate has begun work on the $15 billion investment plan for India’s power sector that will result in generating 10,000 MW for the national electricity grid.
“These are the initial phases of a plan to develop, over the next few years, a pipeline of power projects aiming at a capacity of 10,000 MW. This means a total investment of some $15 billion,” the Hinduja Group head in France Nader Hakimi said.
For information,with regards
rvk41...
