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  • Moral Hazard – Part 2 - 30 December 2010
  • While there are many reasons behind the current economic crisis, the term 'moral hazard' has been applied to risky decision making actions by lenders which led to the chaos in large financial institutions, referred to as the US subprime mortgage crisis, or the 2007-2010 financial crisis. It appears that the whole too-big-to-fail mindset may have resulted in extreme leniency when assessing the ability of borrowers to repay their loans – to the detriment of both lenders and borrowers. A number of financial giants took a tumble, with some being bailed out with government/taxpayers money and others being taken over by previous competitors, shifting at least part of the burden of bad decision making elsewhere.

  • New $800 Billion Bailout Initiative Aimed At Main Street Gives Investors New Hope - 26 November 2008
  • While many U.S. stock market players may have faced Tuesday with trepidation, thinking it unlikely that markets would experience gains for a third day in a row, the announcement by the Treasury Department and the Federal Reserve that $800 billion will be injected into the struggling U.S. economy resulted in the session ending with most major indexes reflecting slight increases. The Dow Jones industrial average closed 0.4 percent up and the Standard & Poor’s 500 index climbed 0.7 percent, however, the Nasdaq Composite dropped 0.5 percent. The Dow may have gained 12.3 percent over the past three sessions, but remains down 36.1 percent for 2008.

  • Yield Curve : Investment and Economic Indicator - 10 November 2008
  • In his book The Strategic Bond Investor, author and bond-market strategist, Tony Crescenzi, notes that a yield curve is “the closest thing the bond market has to a crystal ball”. That being the case, it is a good idea to understand what a yield curve is and how it can assist in investment decisions. A yield curve is a line representing the interest rates (cost of borrowing), at any given time, of bonds with equal credit quality, but different maturity rates. A yield curve is also referred to more formally as the term structure of interest rates.

  • Corporate Results Drag Market Down, World Financial Crisis Summit May Restore Hope - 23 October 2008
  • While U.S. credit markets seem to be loosening up a little, investors have no respite from anxiety as the trickle of third quarter corporate results currently being released seems to be turning into a torrent of bad news. Fears of the country entering into a deep recession cannot be put to rest, especially in light of the fact that many corporate companies are trimming their fourth quarter earnings forecasts, indicating expectations of a bumpy road ahead. All major U.S. indexes dropped by more than 4 percent on Wednesday, with the Dow Jones industrial average ending the trading day with a loss of 514 points, or 5.69 percent, while the Standard & Poor’s 500 index dropped by 6.10 percent and the Nasdaq composite index fell by 4.77 percent.

  • Air of Pessimism Likely to Persist Despite Approval of Revised $700 Billion Bailout - 6 October 2008
  • Following almost two weeks of intense debate, the revised $700 billion financial sector bailout plan was passed by the U.S. House of Representatives, with President George W. Bush signing the bill into law on Friday. With unanswered questions regarding the implementation of the plan and many questioning its potential effectiveness, analysts are doubtful that the plan’s approval will lift the cloud of pessimism hanging over the stock markets, at least in the short term.

  • Financial Sector Concerns Start Off Trading Week on a Negative Note - 26 August 2008
  • The week started off with light trading on the U.S. stock markets as concerns over the state of the financial sector in general were exacerbated by the fact that American International Group (AIG) fell to a thirteen year low. Persistent credit worries and apprehension with regard to global economic growth are also believed to have had a negative affect on trading, with major indexes losing around two percent and the Dow average falling by close to 250 points.

  • 2008 Second Quarter Results Indicate Tough Times Not Over - 1 July 2008
  • With the second half of 2008 looming ahead, the general feeling among stock market investors and financial analysts is anything but optimistic. Following a nerve-racking first quarter, the second quarter of 2008 started off with many investors believing that the worst was over and that earnings growth and stocks would pick up as the year progressed. These high hopes were dealt a death blow as the effects of the credit crisis lingered, oil prices soared, inflation worries persisted and consumers continued to curb their spending.

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