August1991 Posted January 22, 2008 Report Share Posted January 22, 2008 The Toronto Stock Exchange's main index fell for a fifth straight session on Monday, diving more than 4 percent in its biggest intraday drop in seven years, amid concern about the health of the U.S. economy.The S&P/TSX composite index .GSPTSE was down 520.10 points, or 4.08 percent, at 12,217.02 in afternoon trading, after earlier falling as much as 617 points. All of the TSX's 10 main groups were lower. It was the biggest intraday decline since Feb. 16, 2001, and the latest in a string of hefty losses that began last week amid writedowns in the North American banking sector and worries about the prospect of a U.S. recession. Since last Tuesday, the index has lost more than 1,400 points, erasing all of 2007's gains. On Monday, the index revisited territory last seen in November 2006. ReutersThe key point, in my mind, is that the TSX index is now back to where it was in November 2006. Given that it reached an unprecedented peak in October 2007, this - as they say - is a mid-course correction. Does this mean anything for the "real" economy? I doubt it. Equity markets, by their nature, are highly speculative. Traders are debating the value of streams of income off into the future. So, it's normal that share prices are volatile and prone to rapid swings. I'd watch for changes in US housing prices before drawing any serious conclusions: David Rosenberg, chief U.S. economist at Merrill Lynch, says U.S. house prices, which are already down 7% could fall another 25% to 30%, far exceeding the 7% drop during the 1989 to 1992 U.S. real estate slump. The hit from lost housing wealth could top US$6-trillion, which combined with plunging stock markets will likely send the U.S. consumer running for cover. Financial PostOnly 7%? Quote Link to comment Share on other sites More sharing options...
M.Dancer Posted January 22, 2008 Report Share Posted January 22, 2008 I'm of two minds. I know that Toronto Real Estate is way overvalued....yet there always seems to be people willing to pay...It will be interesting to see if the markets continue to fall for another month how many people have bought the over priced homes and are over leveraged.....Don't pick up that phone, it could be a margin call... ....and on the otherhand, I worry.... Quote Link to comment Share on other sites More sharing options...
Jerry J. Fortin Posted January 22, 2008 Report Share Posted January 22, 2008 Its not just Toronto, this is a world wide trend. The financial sector was the beginning of it. strangely nobody recognizes the flawed monetary as the cause. We are watching the beginning of a world wide adjustment. The question on everybody's mind should be is this an international recession? Quote Link to comment Share on other sites More sharing options...
M.Dancer Posted January 22, 2008 Report Share Posted January 22, 2008 The financial sector was the beginning of it. strangely nobody recognizes the flawed monetary as the cause. I'm not to sure what that means..... The cause is what the world assumes the US economy will stagger because of the fallout of lending people money to people who couldn't afford to carry, to buy houses that are over valued. Quote Link to comment Share on other sites More sharing options...
August1991 Posted January 22, 2008 Author Report Share Posted January 22, 2008 I'm of two minds. I know that Toronto Real Estate is way overvalued....yet there always seems to be people willing to pay...It will be interesting to see if the markets continue to fall for another month how many people have bought the over priced homes and are over leveraged.....Don't pick up that phone, it could be a margin call.......and on the otherhand, I worry.... People accept that volatile stock market prices lead to volatile stock portfolio values. OTOH, many people consider their house (and its value) as their nest egg for retirement. When house prices fall, people start to get nervous in a way that they don't when stock prices fall. Now, add to this the existential issue of retirement. Falling house prices reminds boomers of retirement and that reminds them of death. The subprime market isn't the problem - it's the effect it has had on house prices and the effect this has had on perceptions. ----- Returning to the thread, the TSX (indeed equity markets around the world excepting maybe Japan) is in one of its best bull runs in decades. (Compare the past 25 years to the period 1960-80.) The past few days have been a "correction". You could become very rich if you had the sense of the herd and could predict them. Quote Link to comment Share on other sites More sharing options...
Jerry J. Fortin Posted January 22, 2008 Report Share Posted January 22, 2008 Where did those banks get the money to lend? Was the value of the asset at least equal to the cost of borrowing? Or was the bank able to lend money it did not have based on the unrestricted fractional reserve system that allows borrowers not to have hard assets to back up their loans? The gold standard is gone. There is little besides legislation to take its place. Quote Link to comment Share on other sites More sharing options...
M.Dancer Posted January 22, 2008 Report Share Posted January 22, 2008 Or was the bank able to lend money it did not have based on the unrestricted fractional reserve system that allows borrowers not to have hard assets to back up their loans? The banks or in this case, the mortage companies had the money, but when the interest rates when up and the borrowers defaulted, the glut of homes drove the value down causing the lenders to lose... The problem starts with discount mortage companies lending money at artificially low rates tp people who could not afford a rate hike. In the US you could but a house with zero down. So when you had to sell, you had zero equity in the house....This isn't a big problem here but the ripples, when lenders sold their notes to the banks and the banks were left holding the dirty end of the stick... Quote Link to comment Share on other sites More sharing options...
Borg Posted January 22, 2008 Report Share Posted January 22, 2008 When people are crying, it is time to look for opportunities and possibly be buying. Borg Quote Link to comment Share on other sites More sharing options...
White Doors Posted January 22, 2008 Report Share Posted January 22, 2008 The TSX is having a blwo out sale! Come pick up some bank stock, CHEAP!! hurry - won't last long! Quote Link to comment Share on other sites More sharing options...
bush_cheney2004 Posted January 22, 2008 Report Share Posted January 22, 2008 The TSX is having a blwo out sale!Come pick up some bank stock, CHEAP!! hurry - won't last long! Talk about panic....they say it is hard to catch a falling knife, but when it is this easy, who cares. Back up the truck for some bargain shopping! Quote Link to comment Share on other sites More sharing options...
jdobbin Posted January 22, 2008 Report Share Posted January 22, 2008 (edited) Does this mean anything for the "real" economy? I doubt it. Equity markets, by their nature, are highly speculative. Traders are debating the value of streams of income off into the future. So, it's normal that share prices are volatile and prone to rapid swings. As you say the market is speculative. Right now they speculate we are headed for a slowdown. Right now they speculate that the stimulus package won't be enough. Right now they speculate the housing market in the U.S. will be worse. Right now they speculate that Canada can't avoid being caught up in it all. I don't know that there that is much left in the kitty in Canada for tax relief or spending. I guess we'll find out in the budget. Edited January 22, 2008 by jdobbin Quote Link to comment Share on other sites More sharing options...
White Doors Posted January 22, 2008 Report Share Posted January 22, 2008 Talk about panic....they say it is hard to catch a falling knife, but when it is this easy, who cares. Back up the truck for some bargain shopping! Whoop Whoop! Who's yo momma!! Quote Link to comment Share on other sites More sharing options...
geoffrey Posted January 27, 2008 Report Share Posted January 27, 2008 Falling house prices reminds boomers of retirement and that reminds them of death. Brilliant. Quote Link to comment Share on other sites More sharing options...
eyeball Posted January 27, 2008 Report Share Posted January 27, 2008 GW Bush's encouraging Americans to buy a car or take a vacation in the wake of the stock market downturn following 9/11 probaby has a lot to do with the US' current credit issues. The banks response to Bush's call to arm consumers with credit, mirrors the military's response to its call to arms. Both were way over the top and its not surprising that the cost of both are now coming home to roost together. Quote Link to comment Share on other sites More sharing options...
bush_cheney2004 Posted January 28, 2008 Report Share Posted January 28, 2008 GW Bush's encouraging Americans to buy a car or take a vacation in the wake of the stock market downturn following 9/11 probaby has a lot to do with the US' current credit issues. The banks response to Bush's call to arm consumers with credit, mirrors the military's response to its call to arms. Both were way over the top and its not surprising that the cost of both are now coming home to roost together. Nonsense....President Bush had nothing to do with real estate speculation and inverted mortgage products. Where was all the hue and cry when equity markets climbed to record highs? Bush's fault too, no doubt. I wonder who they will blame when Bush is gone? Quote Link to comment Share on other sites More sharing options...
BubberMiley Posted January 28, 2008 Report Share Posted January 28, 2008 I wonder who they will blame when Bush is gone? It's looking like either Obama or Hillary. Quote Link to comment Share on other sites More sharing options...
Jerry J. Fortin Posted January 28, 2008 Report Share Posted January 28, 2008 Or McCain................. Quote Link to comment Share on other sites More sharing options...
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