How Much Longer?!
The U.S. credit crisis has sent the world’s markets into a drastic downturn. U.S. credit, lending, banks, and mortgage houses have been particularly slammed. Countrywide Financial, a California-based mortgage investment company and the largest in the country, has gone from $29 per share to $19 per share in a week, and has tapped into its emergency credit line of $11.5 billion. Bear Stearns, the investment brokerage house, saw roughly 30% of its value lost. It did make a nice recovery on Thursday jumping up about 10% just before the market closed. Mastercard has lost $40 per share in just over a month.
The Asian markets have been feeling the brunt of the decline even more than their U.S. counterparts. In Thursday’s trading, the U.S. was headed for another 2-300 point drop in the Dow, but a late rally managed to lessen the blow to just a few points. However, when the Asian markets opened a few hours later, the sell-off continued. Japan’s central bank injected $10.5 billion (the third injection this week) into money markets to try to stem the tide, but the Tokyo exchange still was down over 5%. Shanghai, Taiwan, and Jakarta all had major dips.
The crisis does not seem to be working itself out, and it’s anyone’s guess when it will end. Much of the selling is indeed panic selling, so many of these stocks would seem to be undervalued at the moment. The Bear Stearns buyback at the end of Tuesday could be an example. It is certainly an uncertain time, but fearless buyers will be looking to take advantage while the prices are low. Hopefully, cooler heads will prevail soon, and the volatility will even out.
