Monday, January 21, 2008
World markets in a spin
And tomorrow morning the US markets will start with a dive as the arbitrageurs work to bring balance back to the markets.
Stock prices fell 7 percent in France and Germany, 5 percent in China and Great Britain, and 4 percent in Japan. Stocks lost value in 42 of the 43 nations with widely followed markets; the only exception was Sri Lanka.And the worst may yet be to come as the causes are deeper and wider than most people yet recognize.
"It was all about blood on the wall," said Georges Ugeux, chairman of Galileo Global Advisors, who was visiting the Indian stock exchange, which fell 7.4 percent (the equivalent of a 900-point drop in the Dow Jones industrial average). "For them, this is a black Monday."
Investors worldwide grew fearful that problems from massive losses on loans made to U.S. home buyers will cascade through the world financial system. For example, the Bank of China is now forecast to record a multibillion-dollar loss on U.S. mortgage investments.Just like in those cheesy Atlantis movies where the earthquake topples one column, then another and another until the whole forum falls on all the screaming people who just couldn't imagine something like this happening.
And companies that insure bonds are incurring such massive losses on exotic securities based on mortgages that one is in receivership and others have had their credit ratings cut. That could cause financial institutions worldwide to mark down the value of a wide range of assets guaranteed by these insurance companies.
Add to that the slowing U.S. economy,
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