When any disaster occurs it takes a few days to assess the damage. Now the statistical reports are coming forth to report that the US markets are facing more calamitous happenings. Standard & Poor's waited till the markets closed on Friday before they lowered the credit rating one level to AA+. They (like everyone else) are blaming the politics on the Hill for failing to cut spending enough to reduce the deficit.
The talk by the economists today (August 5) was one of telling everyone not to over react. They said the market was acting on emotion and needed to calm down as this was not the end. Nevertheless, the damage from this last week of declines is hard not to get emotional about.
1. Stocks fell the most in 32 months.
2. The S & P 500 fell 9.5 % in one week...yikes!
3. Bank of America is the biggest loser with loses of 13 %! Repeating: Bank of America fell 13%.
4. The Dow dropped 698 pts. in one week.
5. Over 2 Trillion wiped out.
If we go by prospect theory that losses are more painful than gains are pleasurable and that people give a higher negative value to a loss; then we know that this was a very upsetting week for many. The losses were catastrophic with many retirement funds taking a huge hit. And now with the US credit rating being lowered we will all feel this as our interest rates begin to climb. If you ask me, this has been a very bad year in so many ways...all the natural disasters of fires, floods, droughts, tornado's, and now financial crisis must be added to the list. All we can do is wait and see what tomorrow will bring. And thank goodness it is a week-end.
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