More trouble ahead for Wall Street?

NF Reporter · 08-12-2007, 01:23 PM

Reuters - It will be a weekend of high anxiety for investors on Wall Street, as they brace themselves for what will likely be another rollercoaster ride for the battered financial markets.

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waltky · 08-17-2007, 01:03 AM

The beginning of a global economic downturn?...

Global Markets Routed
16 August 2007 - Financial markets in Asia and Europe fell sharply Thursday. The big markets in North America were heading downward much of the day but rebounded at the close. The Dow Jones Industrial Average ended the day with a loss of just 15 points, and the Standard and Poor's index of 500 stocks ended more than four points higher.

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Asian markets set the tone early, with Japan's Nikkei average falling nearly two percent, while Hong Kong's Hang Seng Index plummeted 3.3 percent. The trend was no better in Europe, where Germany's DAX index shed 1.66 percent, France's CAC-40 dropped more then 2.5 percent, and London's FTSE 100 plunged more then three percent.

"The moves have been extremely violent," said Boston-based market analyst Art Hogan. "We are seeing the kind of volatility we have not seen in about five or six years in this marketplace. It is very difficult for investors to have any confidence in the stock market at his juncture." Persistent financial headlines concerning tight credit conditions in the United States and elsewhere have prompted major central banks to inject, collectively, hundreds of billions of dollars of cash into banking systems worldwide.

But not everyone is convinced a so-called "liquidity crunch" is solely to blame for recent poor market performance. Sam Stovall, an investment strategist at the U.S.-based financial data group Standard and Poor's, notes that the United States and other nations have enjoyed rising stock markets for several years now, and that all bull markets eventually pull back, erasing some gains. "Every bull market since 1970 has seen at least one 10-plus percent correction within it," he said. "We have not had one since this bull market was acknowledged in May of 2003. So I think we are overdue."

What no one can say for sure is whether the current global rush to sell stocks signals the end of rising markets, or merely a pause in an upward trend. Speaking on U.S. television, U.S. billionaire investor Warren Buffett suggested market downturns can be useful in that lower stock prices inevitably generate new investment opportunities.

VOA News - Global Markets Routed

waltky · 10-02-2008, 01:20 PM

Ol' Warren was on Charlie Rose sayin' he wantin' a piece of the action...

Buffett: Bailout may not be big enough
October 2, 2008: Investment guru says $700 billion bailout is crucial, but that it may not be large enough to solve the credit crisis.

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Warren Buffett said Thursday that it is crucial to the global economy that the controversial $700 billion Wall Street bailout passes, but warned that the pricetag may have to rise. Buffett also proposed that the U.S. Treasury Department and private investors team up to buy the troubled mortgage assets behind the crisis gripping markets worldwide. "If we don't get [this] solved next week, I may go back to delivering papers," said Buffett during an appearance at Fortune's Most Powerful Women Summit in Aviara, Calif.

Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A), likened the recent turmoil in the markets to an "economic Pearl Harbor" and said that a quick response is needed. "We've never seen anything like this where perfectly credit-worthy companies can't get funds," he said. He didn't estimate how much more money would be needed to buy enough toxic mortgage investments in order to create a more stable market and get credit flowing. On Wednesday, the Senate passed a $700 billion bailout package. The House is expected to vote on the revised bill on Friday, four days after rejecting an earlier version.

Buffett suggested that a partnership between Treasury and private investors to buy the assets. "One easy way to do part of the program is to say to anybody - hedge fund operators, Wall Street firms, or anybody else - that the Treasury will lend you 80% of the purchase cost of a bunch of distressed assets," he said, explaining the concept of his proposal. The investors benefit from borrowing at lower rates, but Treasury gets first claims any returns from the sale of those assets before investors would get a penny.

"Now you have someone with 20% skin in the game," he explained. "Believe me I won't be overpaying if I'm buying with that kind of leverage. And you have someone [the investors] to manage the assets to the extent they need to be managed." Buffett said that the bill that passed the Senate Wednesday evening isn't perfect, but that it's crucial to prevent the global economy from grinding to a halt. He then warned it will take a while to work and that the economy is going to struggle even with its passage. "Anyone who thinks this bill is a panacea is [making] a mistake," he said. "Without it, it's a disaster."

Buffett: $700 billion bailout may not be be big enough - Oct. 2, 2008