At least the "footsie" -- London's Financial Times/Stock Exchange, or FTSE -- is trying to pull itself up. The London Times reports that by mid-morning London time, the market was "clawing its way back."
But that's about the only good news in a morning where investors are wondering whether to sell apples or jump out of a high window. Well, not all. One London commenter writes: "Those magnificent men in their flying machines, they go up-paddy up, they go down-diddy down."
Well, not up-paddy up, probably not any time soon.
Fears that the US was sliding into recession and worries that some big financial institutions may be in trouble sent share prices collapsing around the world on Monday, and the share price carnage continued overnight in Asia.
The US market is expected to drop a further 4.5% today. Analysts quoted in the New York Times maintain that fear, not "fundamentals," is causing the slump.
“I don’t think it’s warranted by the fundamentals,” said Edward Yardeni, an independent strategist. “The resilience of the global economy in the face of a credit crunch has been impressive.”
Mr. Yardeni warned, however, that in a time of panic and fear, less attention is paid to fundamentals, like a fairly tight United States job market and strong growth and the extraordinary buildup of foreign exchange reserves in emerging markets. The result is panic selling and the prospect of a global recession. “People are creating the financial violence that they hoped to avoid,” he said.
Not all agree.
Other analysts point out that the overseas uncertainty reflects the unpleasant if not devastating reality that the excesses of the long-running credit boom will not go away soon.
What makes this correction more dangerous, they say, is that the selling is not being driven by panicky retail investors, as it was in the collapse of the technology bubble, but by hedge funds and investment banks that find themselves saddled with illiquid securities backed by an array of valueless assets.
“What you see is not a panic of the public. This is a panic of the sophisticated,” said James Sinclair, a well-known gold trader who oversees a financial Web site and who has warned investors for years about the dangers of derivatives. “But this will have a tremendous impact on the public. In the end, this will hit Joe Sixpack. It’s very serious, and drastic emergency economic action is needed.”
