The term "Subprime meltdown" refers to a financial crisis that arose in the mortgage market after a sharp increase in mortgage foreclosures, mainly subprime, collapsed numerous mortgage lenders and hedge funds.
The meltdown spilled over into the global credit market as risk premiums increased rapidly and capital liquidity was reduced. The sharp increase in foreclosures and the problems in the subprime mortgage market were largely blamed on loose lending practices, low interest rates, a housing bubble and excessive risk taking by lenders and investors.
It is also known as the "subprime collapse" or "subprime crisis".
Following the tech bubble and the events of September 11, the Federal Reserve stimulated a struggling economy by cutting interest rates to historically low levels. As a result, a housing bull market was created. People with poor credit got
in on the action when mortgage lenders created non-traditional mortgages: interest-only loans, payment-option ARMs and mortgages with extended amortization periods. Eventually, interest rates climbed back up and many subprime borrowers defaulted when their mortgages were reset to much higher monthly payments. This left mortgage lenders with property that was worth less than the loan value due to a weakening
housing market. Defaults increased; the problem snowballed, and several lenders went bankrupt.
Investors and hedge funds also suffered because lenders sold mortgages they originated into the secondary market. Here the mortgages were bundled together and sold to investors as collateralized debt obligations (CDOs) and other mortgage-backed
securities (MBSs). When the higher risk underlying mortgages started to default, investors were left with properties that were quickly losing value. In the wake of the meltdown, central banks released liquidity into the market place, which allowed
struggling lenders and hedge funds to continue operations and make the necessary payments on their obligations.
Thursday, December 27, 2007
Wednesday, December 26, 2007
A Punter's Game..
Merry XMas to all my readers! I welcome you all to my latest post! It's a bright, sunny day here and what a gripping match going on between India and Australia at the moment! I like this type of hard-fought matches; I hope India can continue with their determination to fight the Aussies like they have done in the day so far!
Seems like a punter's game at the moment in the market; just been informed that the January Nifty futures are seeing a good roll over with pretty high premiums! The bulls might be gearing up for another run in 2008; atleast for the first month! Some may attribute the rise in the stock markets at the beginning of a year to the January effect.
January effect may be defined as a general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off. The January effect is said to affect small caps more than mid/large caps. This historical trend, however, has been less pronounced in recent years because the markets have adjusted for it. Another reason the January effect is now considered less important is that more people are using tax-sheltered retirement plans and therefore have no reason to sell at the end of the year for a tax loss.
Whichever way the market goes, it sure makes for an interesting watch! Because you got to time your exits and entry very carefully and if lady luck is with you, then, you, my dear punter, might have just won a lottery!!
Hang on people, kyunki picture abhi baki hai!! And just as I wrote this, our dear captain, Anil Kumbe, snacthed yet another Australian wicket, Andrew Symonds! This is the third wicket to fall in the post-tea session and India might be fancying their chances of polishing off the Australian tail quickly! All this seemed highly unlikely when Australia put up an opening stand of 135 but kudos to Kumble and his bowlers for not letting up! May the Indians maintain their intensity!
Seems like a punter's game at the moment in the market; just been informed that the January Nifty futures are seeing a good roll over with pretty high premiums! The bulls might be gearing up for another run in 2008; atleast for the first month! Some may attribute the rise in the stock markets at the beginning of a year to the January effect.
January effect may be defined as a general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off. The January effect is said to affect small caps more than mid/large caps. This historical trend, however, has been less pronounced in recent years because the markets have adjusted for it. Another reason the January effect is now considered less important is that more people are using tax-sheltered retirement plans and therefore have no reason to sell at the end of the year for a tax loss.
Whichever way the market goes, it sure makes for an interesting watch! Because you got to time your exits and entry very carefully and if lady luck is with you, then, you, my dear punter, might have just won a lottery!!
Hang on people, kyunki picture abhi baki hai!! And just as I wrote this, our dear captain, Anil Kumbe, snacthed yet another Australian wicket, Andrew Symonds! This is the third wicket to fall in the post-tea session and India might be fancying their chances of polishing off the Australian tail quickly! All this seemed highly unlikely when Australia put up an opening stand of 135 but kudos to Kumble and his bowlers for not letting up! May the Indians maintain their intensity!
Saturday, December 22, 2007
21,500 - A new high in sight??
As the year 2007 draws to a close, the bulls are again seen betting on the sensex having a minirun and crossing the lifetime high it achieved earlier this month! The U.S. markets have been buoyed by the infusion of capital and strong fourth earnings to-date. Add to it the lower than expected inflation figure and better employment data and suddenly, everything does not seem all that bad, does it??
The air suddenlly has a merry nip to it, there is a spring in everyone's steps and hopes in their hearts that maybe, just maybe the Sensex is gearing up for another shot, another strong rally, to prove all pundits wrong and touch new highs!! The technical analysts all seem pretty united on the fact and have a range of targets that the Nifty can achieve in the short-run!
Maybe merry days are here again, maybe Santa has heard everyone's prayers and decided to answer some too!!!! Maybe, just maybe, we are gonna see some lights at the end of this year, maybe some of us are in for a lovely XMas gift too!!
Sorry guys (yes gals, I'm a bit of a chauvinistic pig!!), sorry for including so many "maybe"s .. But believe me, based on some pretty strong earning reports and the seasonal sentiment, expect the sensex to stage a small comeback in the near-term! N you long-term investors, just stick in dudes!! The Indian markets have a very bright future ahead!! Wishing you all a lovely time ahead!!
The air suddenlly has a merry nip to it, there is a spring in everyone's steps and hopes in their hearts that maybe, just maybe the Sensex is gearing up for another shot, another strong rally, to prove all pundits wrong and touch new highs!! The technical analysts all seem pretty united on the fact and have a range of targets that the Nifty can achieve in the short-run!
Maybe merry days are here again, maybe Santa has heard everyone's prayers and decided to answer some too!!!! Maybe, just maybe, we are gonna see some lights at the end of this year, maybe some of us are in for a lovely XMas gift too!!
Sorry guys (yes gals, I'm a bit of a chauvinistic pig!!), sorry for including so many "maybe"s .. But believe me, based on some pretty strong earning reports and the seasonal sentiment, expect the sensex to stage a small comeback in the near-term! N you long-term investors, just stick in dudes!! The Indian markets have a very bright future ahead!! Wishing you all a lovely time ahead!!
Friday, December 21, 2007
Good times ahead??
A pretty bruising week for the Indian markets, just ahead of the festive season -- The season of joy, cakes, pastries and lights!! Oh well, me being the foodie that I'm, I just can't wait for XMas to arrive! I love to take a walk down the beautifully lit Park St area and tuck into some lovingly baked cakes and pastries at Flury's! Of course, these days you are bombarded with ads for different parties being organized at different places, with all promising a different theme and of course, plenty of Bolly celebs, TV stars and some firangi dancers imported from some godforesaken place!!
Anyways, coming to the markets, the U.S. marekts are still pretty skittish but are showing signs of some positive momentum just ahead of year-end! The market has been boosted by some strong earning reports while soaking up the negative impact from the write-downs reported by Bear Stearns and Morgan Stanley. Morgan Stanley, in turn, has been boosted by a $5 billion investment from a Chinese firm.. All in all, the U.S. markets seem poised to forget the underlying worries for a while and give the investors something to smile about in this merry season!
Taking their cues from the U.S. markets, even the European and the Asian markets seem to be recovering lost ground! The Indian market should, therefore, witness some strong momentum when it reopens on Monday, December 24. Don't get swayed by the market movement, the underlying fundamentals still seem jittery! Booking your profits (for short-term investors) and exiting the market at this stage is likely going to be the best scenario in the near future. The Sensex is also going to be rangebound in the 18k-20.5k mark!
Finally, I feel like kicking the posterior of Orient Hotels for coming out with such a stinking reason (" Our image in the U.S. will be tarnished") for not forming an alliance with the Tata chain of hotels!! Oh well, the Orient group be damned, we Indians will conquer the world pretty soon! Those who want to join us are WELCOME to do so, those who don't, well we wish them the best of luck! We have nothing against our comeptitors; they know what they are worth!
Speaking of Welcome, it's the fourth movie this year after Namastey London, Heyy Baby and Bhool Bhulaiya starring Akshay Kumar in the lead! The promos look ok ok but hey the movie has got Aki baby and we all know the magic he can spin!! Besides, I'm sure Paresh Rawal, Anil Kapoor and Nana Patekar together will be able to tickle a few of our funny bones! Can't say much for the rest of the cast; I hope to catch this movie in the coming weekend (High hopes!! :-( ) .. You too go ahead and welcome the festive season in your homes!
Wishing you all a Merry XMas and a Happy New Year ahead!! Forget your fitness worries and calories intake for a while, go ahead and gorge on the yummy food, the pastries, cakes, cakes and some more pastries!! N oh, Don't forget to down everything down with a steaming cup of coffee, shared with your friends and family!!
Anyways, coming to the markets, the U.S. marekts are still pretty skittish but are showing signs of some positive momentum just ahead of year-end! The market has been boosted by some strong earning reports while soaking up the negative impact from the write-downs reported by Bear Stearns and Morgan Stanley. Morgan Stanley, in turn, has been boosted by a $5 billion investment from a Chinese firm.. All in all, the U.S. markets seem poised to forget the underlying worries for a while and give the investors something to smile about in this merry season!
Taking their cues from the U.S. markets, even the European and the Asian markets seem to be recovering lost ground! The Indian market should, therefore, witness some strong momentum when it reopens on Monday, December 24. Don't get swayed by the market movement, the underlying fundamentals still seem jittery! Booking your profits (for short-term investors) and exiting the market at this stage is likely going to be the best scenario in the near future. The Sensex is also going to be rangebound in the 18k-20.5k mark!
Finally, I feel like kicking the posterior of Orient Hotels for coming out with such a stinking reason (" Our image in the U.S. will be tarnished") for not forming an alliance with the Tata chain of hotels!! Oh well, the Orient group be damned, we Indians will conquer the world pretty soon! Those who want to join us are WELCOME to do so, those who don't, well we wish them the best of luck! We have nothing against our comeptitors; they know what they are worth!
Speaking of Welcome, it's the fourth movie this year after Namastey London, Heyy Baby and Bhool Bhulaiya starring Akshay Kumar in the lead! The promos look ok ok but hey the movie has got Aki baby and we all know the magic he can spin!! Besides, I'm sure Paresh Rawal, Anil Kapoor and Nana Patekar together will be able to tickle a few of our funny bones! Can't say much for the rest of the cast; I hope to catch this movie in the coming weekend (High hopes!! :-( ) .. You too go ahead and welcome the festive season in your homes!
Wishing you all a Merry XMas and a Happy New Year ahead!! Forget your fitness worries and calories intake for a while, go ahead and gorge on the yummy food, the pastries, cakes, cakes and some more pastries!! N oh, Don't forget to down everything down with a steaming cup of coffee, shared with your friends and family!!
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