Cyberwanderer’s Blog

October 31, 2008

Reality Bites. Stock Market Rally Comes to Screeching Halt

Filed under: Canada,economy,Politics — cyberwanderer @ 6:55 pm
Tags: , , , , , , ,

Stock market back to it’s downward trend after few days of artificial rally. The overly optimist claim there’s lots of buying opportunities. But these people need to be reminded that in the recession of early 1990s, house prices went down and down. Then some people went in thinking it’s buying opportunities. Little did they know that it was just the beginning of a long decline. This time, nobody knows where the bottom is. It is not clear if the billions of dollars injected, to keep what would otherwise be a bankrupt financial institution afloat, would be enough. Or would it be just delaying the inevitable. It’s more band-aid solution than fixing the root cause of the problem. During Alan Greenspan term, the U.S. was about to go to recession but they manage to delay it by loosening the house loans and allowed people who can’t normally buy house take up loan. This created an artificial surge. Another band-aid solutions without taking care of the problem. The worse thing they did was package these soon to be bad loans (aka subprime) into A rated investment instruments. Meaning good investment and debt instruments from stable sources. E.g. credit card loan, other legitimate secure loans. As a result, lots of investors got burned thinking they were investing on a relatively safe investment.

Today, Canadian stock market continue to fall, our economy had shrank. Government asked to return to prudent spending. Haven’t they heard? Harper is a prudent government. It must be true because Harper said so. He also said there’s nothing to worry about and stock market offers buying opportunities.

Thank God there’s still a sensible government in Canada. In Ontario to be specific. The government announced they are taking back cost downloaded to the economically strained cities. The cost was downloaded by Harris’s government back in the 1990s which contributed to degradation of infrastructure, services, skyrocketing property taxes and sorry financial state of the cities in Ontario.

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