Market Meldown

[NJ5]

Aiemond said:

 

Well, many european companies also have investments in american markets. Since the stocks they are invested in go down, thier value as a company goes down too and that, in turn, makes the investors in the europen company nervous. So, i'll use a hypothetical scenario here.

Big British company has investments in many different companies. They may have had stock in Bankruptfirm001. Thus, they loose basically all thier money in that stock (ex it was 63 a share, now its 14). Thus, the value of Big British company goes down and the investors in Big British Company feel a bit skittish and sell.

It is more complex than this and I can't talk about everything that might cause this (I just don't know it), but this is the gist of it.

I understand why European companies would drop (as Asian companies did, and also will tomorrow when their main markets open after today's holiday). What I don't understand is why American companies didn't drop more.

Apparently it's not just me who's baffled:

http://biz.yahoo.com/cnbc/080915/26718956.html

The market behavior amid a credit crisis that seemed to have no bottom had market pros baffled.

"It's the worst I've ever seen," Dave Rovelli, head of US equity trading for Boston-based Canaccord Adams, said of the uncertainty in the current market climate. "If you were to say that we'd have Lehman, Fannie Mae and Merrill, AIG, everything that happened in the last week and we still haven't retested the lows of July 15, the lows we set back in (the collapse of) Bear Stearns, I would say you're crazy. I would think the Dow would be back at 10,000. I think it's unbelievable."