What's causing this? The economy seems to be in pretty good shape. Unemployment is still extremely low.
The Chinese were buying everything from everybody and they're now going to cut back on their spending. That was the trigger. Then the program traders and the hedge funds panicked. I love it. I've been sitting on some cash, waiting for a buying opportunity and this looks good. I think I'll wait a few more days for some real fear to set in, then buy some ETFs...
Shanghai Flu Posted 2/27/2007 The Economy: Plunging share prices in China quickly got blamed for Tuesday's scary stock market meltdown here. And no doubt, that was the trigger. But investors have other things on their minds, too. As with most stock market sell-offs, it's not one thing. But in this case, China plays a big role — maybe a deciding one. Market followers awoke Tuesday to the unsettling news that the main Shanghai stock index had plunged about 9% overnight on growth fears. China's communist bosses plan to begin their annual policy meeting March 5, and some think they might tighten economic policy. China's leaders are making noises about their economy growing too fast. This year, for the fifth year in a row, GDP is expected to grow at least 10%. Since 1990, it has averaged 9.8%. But after a remarkable 15-year building boom, bad debts have piled up, and China's rulers fear an inflation spike. Remember: The June 1989 Tiananmen revolt was fueled not just by a desire for more freedom, but by anger over high inflation. That may explain why China's No. 3 leader, Wen Jiabao, warned on Tuesday that it will take 100 years for China to become a democracy. For now, he said, the country will focus on "sustained rapid growth." "Sustained" is the key word. Today, China is big enough — $3 trillion in total output — that when it sneezes, the world catches cold. That includes the U.S. But are all the U.S. stock market's ills the fault of China? No. Investors may also be starting to worry about Iran's push for nuclear weapons. Until Iran is stopped, either through military strikes or hard-nosed diplomacy, the world economy is at risk. Investors have also seen an unusually fast decline into disarray and outright incompetence by the new Democrat-led Congress. After years of criticizing President Bush, the Democrats have displayed a frightening lack of concern for America's security — reminding everyone they're still the party of Jimmy Carter. We could probably add Alan Greenspan's comments to the mix. The former Fed chairman remarked Monday that the U.S. could slip into recession this year due to a slump in housing and the federal budget deficit. Taking those comments and the events in China and Iran to heart, U.S. investors now have priced in a more than 50% likelihood of a Fed rate cut in the next couple of months — down from a probability of virtually nil just weeks ago. Yes, Tuesday's decline appears to be a serious break. But let's not forget that we've had four years of steady market gains thanks to tax cuts that set off one of the least-heralded economic booms in history. And while the Dow was off 3.3% and the Nasdaq 3.9%, those were only the biggest drops since March 17, 2003, and Dec. 9, 2002, respectively. Scary, but not records by any means.
Or the worst case scenario , someone knows something, in a way of terrorist attack or some military action in the next couple of days. You think Bush is ready to attack Iran?
fwiw, the China concerns coupled with Greenspans comments and perceived risks from the sub-prime mortgage market spilling over has everyone a little jumpy....throw in the fact that we've not had a healthy pullback in quite some time and you've got the perfect recipe for a correction. Corporate earnings, dividends and balance sheets are very solid, private equity firms continue to put a bid under a market already flush with liquidity.....valuations continue to be quite reasonable given the prevailing conditions. I'll remain fully invested. Often wrong, never in doubt! :wink:
...hang in there Jiffy! It might be a little bumpy for a bit, but we'll get through it. One of these was overdue....
T Buck! I shouldnt watch CNBC as much as I do. They are saying this will wipe out gains from 06 and head us back into 05. Damn :!:
I, too, have it - and others - on all day. Not all of 'em are talking that junk Jiffy. You're listening to the wrong ones! Hang in there..... :wink:
Hopefully this is just a correction. I hope the market doesn't take a dive just as I'm retiring and going to have to start living off my investments. Gator Bill
Bill, by any reasonable historical standard we were long overdue for a correction....corporate earnings and dividends are at record levels, balance sheets are solid and the economy remains on firm footing. Investors are a little jumpy about the implications of dislocation in a very small portion of the mortgage market and slowing of the Chinese economy forcing many to lower their risk profile or seek greater compensation for risk exposure. Fundamentals remain solid...ignore the naysayers and uninformed chicken-littles of the world, keep your portfolio well-diversified and enjoy your retirement.
There's always some seasonal selling at this time of the year as people sell stocks to pay taxes... The market usually rebounds when we get past tax day.