More noise to come?
August 4th 2007 07:44
Investors are nervous at the state of things as more news highlighting the increasingly worrisome US credit crunch. The fears of the credit problem spreading to the wider economy have been acting much like a yo-yo, with market participants furiously reacting to any news of the credit and subprime mortgage issues, to the point of extreme overreaction. They feel their legs shaking thinking that, after a good several years of bull market, the bears have arrived.
More is to come as we enter choppier markets in the near term when more companies reveal their exposure to the US credit crunch. On the home front, we have seen three big boys affected by their US collatarised debt obligations in their investments. Think Macquarie Bank. However, the attention given to them is unjustifiably biased. Please raise your hands if you know that more than 35 local governments in Australia are affected by the effect of the US credit market.
If yes, good for you. You know more than what it seems on the surface.
If you don't read the Australian Financial Review, or any overpriced investment newsletters for the matter, you would probably didn't get much wind of the issue. It took an overseas media to bring us the story. The Standard reports:
"Meanwhile, more than 35 local governments in Australia may lose as much as A$25 million (HK$167.2 million) after investing in securities held by Lehman Brothers Holdings, the Australian Financial Review reported.
Lehman Brothers, the fourth-largest securities firm in the United States, attempted to reassure Australian investors of subprime-linked securities, vowing to make interest payments despite losses from forced asset sales."
Although $25 million may not seem much, in fact it is rather miniscule, relative to the enormous investment capital but at least now we know that the US credit crunch has infected from the top funds to, possibly, your local government. Can this news assist in your investment decision? There is no clear cut answer but it is still better than being out in the cold.
With interest rate hike next week imminent coupled with the current spotlight on credit, there would be more rough seas to sail on. In other words, more noise in the short term but as the analysts believe, long term boys may sail out to a calmer sea with light winds and good dose of sunshine.
Keyword is: "Quality"
More is to come as we enter choppier markets in the near term when more companies reveal their exposure to the US credit crunch. On the home front, we have seen three big boys affected by their US collatarised debt obligations in their investments. Think Macquarie Bank. However, the attention given to them is unjustifiably biased. Please raise your hands if you know that more than 35 local governments in Australia are affected by the effect of the US credit market.
If yes, good for you. You know more than what it seems on the surface.
If you don't read the Australian Financial Review, or any overpriced investment newsletters for the matter, you would probably didn't get much wind of the issue. It took an overseas media to bring us the story. The Standard reports:
"Meanwhile, more than 35 local governments in Australia may lose as much as A$25 million (HK$167.2 million) after investing in securities held by Lehman Brothers Holdings, the Australian Financial Review reported.
Lehman Brothers, the fourth-largest securities firm in the United States, attempted to reassure Australian investors of subprime-linked securities, vowing to make interest payments despite losses from forced asset sales."
Although $25 million may not seem much, in fact it is rather miniscule, relative to the enormous investment capital but at least now we know that the US credit crunch has infected from the top funds to, possibly, your local government. Can this news assist in your investment decision? There is no clear cut answer but it is still better than being out in the cold.
With interest rate hike next week imminent coupled with the current spotlight on credit, there would be more rough seas to sail on. In other words, more noise in the short term but as the analysts believe, long term boys may sail out to a calmer sea with light winds and good dose of sunshine.
Keyword is: "Quality"
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