Wednesday, 28 February 2007

Shanghai > New York > Tokyo (and everything in between)

Some coffee-table reading stuff for the day

Andrew Leonard from's How the World Works:

A long day for the global economy

Andrew Leonard, 20:12 EST, Feb. 27, 2007

In my last post I wrote that traders in New York would have a sleepless night tonight. But they don't have to wait for morning if they're looking for more turmoil in the markets. Two hours after the Tokyo Stock Exchange opened, as of about 5 p.m. PST, the Nikkei 225 index had fallen 588 points, or about 3.25 percent of its value.

Those numbers may well spike up and down as the trading day continues: The Nikkei first fell 700 points before rebounding a bit. But a day that begins with a stock market crash in Shanghai, continues with an implosion in New York and then finishes with panic selling in Tokyo is not your ordinary day. If a defining characteristic of the global economy is technologically mediated financial integration, then what we are currently witnessing could be a state-of-the-art global market meltdown.

In his previous post, he mused about how much we do not know:

This ... the kitchen-sink explanation for market behavior. Or, in other words, we really don't have a clue why the market spooked.

.... the lack of a single all-explanatory factor suggests that traders and investors are in a state of deep nervousness over where the economy is headed, and they are ready to bolt for the exits at a moment's notice. All it took was a discouraging word from Greenspan, a meltdown in Shanghai and a suicide bomber in Afghanistan, and they were off!

But continued with a relatively more sanguine note:

But you never know. On Wednesday traders looking for bargains could swoop back in, and few market observers would be surprised to see a sudden lunge back up. Certainly, if you look at a chart of the Dow over the last five years, you will see little reason for pessimism. Sure, there have been some minor setbacks along the way, but the overall trend line has been up, up, up. How much can you complain when your correction comes after a record high?

On other notes, AP just released a mostly redundant piece with the title - Economists Say Recession Unlikely.

... many economists put the probability of a recession at about one in five.

And WSJ has a 'still hot from the oven article' by Greg Ip on Greenspan's influence, titled - Markets Find It Hard To Break the Greenspan Habit.

It begins with:

As chairman of the Federal Reserve, Alan Greenspan had 200 Ph.D. economists (!) at his disposal to help decipher economic and market trends. Now, in the year since retiring from the job he held for 18 years, he relies on less than a half-dozen staffers to analyze the same economic trends.

The last 48 hours have made clear, though, that investors can be just as devoted to what he has to say about those trends -- a devotion some say makes it harder to concentrate on what his successor, Ben Bernanke, has to say.


No comments: