"... But here is a basic and recurrent process. It comes with rising prices, whether of stocks, real estate, works of art or anything else. This increase attracts attention and buyers, which produces the further effect of even higher prices. Expectations are thus justified by the very action that send prices up. The process continues; optimism with its market effect is the order of the day. Prices go up even more. Then for reasons that will endless be debated, comes the end. The descent is always more sudden than the increase; a balloon that has been punctured does not deflate in an orderly way."
The financial orgies that bankers and speculators engaged in came to an abrupt end early last year. But 2007 was the calm before the storm. Banks that have thrived on loose credit and rising home prices have suffered (to say the least) when home prices start to fall. As banks faced higher defaults, 'disciplined underwriting' came back to vogue suddenly and risky borrowers that have been been enjoying the high life by refinancing previous loans suddenly faced calls on loans with no available lenders.
Home owners in some many american states could no longer use their houses as ATM and drawdown their home equity. Many faced negative home equity instead. Exotic financial instruments such as CDO, MBO, CDS exploded. The banks start to suspect each others balance sheet (due to the toxic mess in the assets) , inter-bank short term financing becomes expensive and for some banks, their oxygen source was cut off and left to wither in the dried out land.
Where do we go from here? This is exactly the moment where the strong gets stronger and weak gets wiped off. Examples of Wells Fargo's bid for Wachovia and Eli Lilly's purchase of ImClone is a good example of well capitalised firm taking advantage of the credit crises. Others firms like and Leucadia and Berkshire are also finally moving their huge pile of cash to some other uses. Can we identify these strong companies and capitalise on their strength? Are they available at not too high a price? Seek and i hope i'll find some more.
Anyway on the topic of the Great Crash, my terrible driving skill finally materialized as a physical damage to my dad's car. It happened in a rather spacious carpark. While reversing into a parking lot, the front side of the car brushed against the rear bump of a van (that is OPPOSITE the lot i was reversing into). Haiz. My dad's hand was cold when he calmly told me to change over and he parked the car in. He didn't even scold me, and even managed to say something like 'study hard hor, can't be a taxi uncle next time'. WOW! the papa that explodes to things like me/my mom being 5 mins late has EVOLVED.
Think i must really find ways to be pretty rich before too long. If i can't drive my parents around next time, must at least get a trustworthy chauffeur to ferry them around.
For me? i think i'll just have a deal with SMRT to have my private cabin so i can do my part in keeping mobile accident rate and blood pressure of other road users low.
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