Thursday, August 16, 2007
Credit Crisis, Time to Panic?
BBC News: "Shares on Wall Street have mirrored losses elsewhere, as uncertainty over the impact of turmoil in the US sub-prime lending market persisted. The Dow Jones index of top US shares opened 1.2% lower, while the Nasdaq shed 1.1% in the first hour of trading.
And as concern about the state of world credit markets continued, London's FTSE 100 dived below 6,000 points."
Yes folks, it's bad out there and who knows, it may get a lot worse before it gets better?
The BBC also reported, "The recent financial market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history."
Well, that might be the case, but why is it that the rest of us have to pay for these stupid bank's mistakes? Don't make the mistake of thinking that it won't effect you, because it will. Already millions of people, and that includes millions of people with A1 credit, are now finding out that they are now not only forced to pay higher interests on everything they borrow, but that they are in, some cases, no longer able to even get a loan!
To give you an example what the current crises can mean you only have to look at that Wall Street darling, Apple Inc. The stock recently hit a high of $151 dollars and a market cap of some $127 B. Now, after some rotten rumors and the credit crisis, Apple's stock has crashed big time to a low of $115 per share. It's market cap even slipped to $99 B before recovering up slightly over the $ 100 B level. That's an incredibly drop of almost one quarter of it's stock price and a drop of some 22 % of it's market cap!
The really bad news is that Apple is not the only stock that reflects the current credit crisis effect, a lot of stocks are in the same boat - a sinking boat. The question is how long can this sinking boat stay afloat? That is anybody's guess.
If the stock market continues to reflect the current credit crisis in it's price you can rest assured (and that's a funny way of phrasing it?) will also effect other areas of the business world and we mere mortals. Car prices, food prices, durable and perishable goods, you name it, they could also be forced to jack up their prices. In other words we all end up suffering because of the mistakes of past greedy loan managers of those bad banks!
Is it time to press the panic button? Probably not quite yet, but it could be soon if this disgusting crisis is not solved and solved soon. I personally think governments and business's around the world will come up with some type of temporary solution, but sadly, it will be no more than that, a temporary solution.
We the western nations of the world have been living beyond our means for awhile now and it just may be time to pay the piper on this one.
And that's my 2 cents on the multi-billion dollar credit crisis for this Thursday, August 16, 2007.