Again the U.S. Dow Jones plunged 360 points Wednesday *yawn*. Is that the best it can do? I’m still waiting for 4-digits drop as I’ve not seen that before but 3-digits drop is quite normal nowadays, no? And aren’t you sick and tired with this subprime crisis being put as target on the shooting board? You read the news that investors worried about spreading fallout from the credit crisis at banks and about a dollar that just keeps getting weaker. Or the oil prices keep on going up the sky and blah blah blah. Yeah, crude oil hit $98 – big deal.
When the interest rate was cut, the after effects are just that – weaker dollar, higher oil prices and most likely higher inflation. So the investors should expect such impact. Life still needs to continue. Citibank Inc. and Merrill Lynch & Co has spilled the beans and now Morgan Stanley said its fourth-quarter profit will be reduced by $2.5 billion in write-downs related to the ongoing credit crisis. The nation’s second largest investment bank said it could lose up to $6 billion if all subprime mortgage-related investments were to go bad.
So what if financial institutions have already suffered an estimated $55 billion of losses following a sharp increase in U.S. mortgage defaults this year? When the bubble burst, investors should have displose or started to short the financial stocks. It doesn’t make sense to long on financial related stocks unless you’re day trader trying to scalp to make minor profits out of it.
Instead of crying Armageddon, why not think it this way. Weaker dollar has already pushed a portion of funds elsewhere such as Asia, assuming Ben Bernanke will not cut the rate again in December. The remaining portion of funds that are squeezed out from financial stocks need to re-park into other sectors such as technology, healthcare etc. So it’s not like thousands of stocks within Wall Street will see a depression out of a sudden. There’re still stocks that are resistant-proof to the housing crisis. Just think of it and you’ll know where to park your money.
And talk about 300 points plunge, if you care to pull out the chart and take a look at the Dow Jones performance for 1-month period you’ll notice there were at least three times the DJIA took the 300 points bunjee jump. So get used to it.
Other Articles That May Interest You …
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- Rate Cut’s effect – high Oil Prices and weaker Dollar
November 8th, 2007 by financetwitter
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