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Tuesday, January 22, 2008

Asian Stocks Slump.....are the fears justified ?

Today, we saw a meltdown of all the Asian Stock Markets......I was especially surprised at the Nikkei registering its sharpest fall since 9/11.

Are things really that bad ? I don't think so....

The U.S. economy might tend towards a recession, based on which assumption there was a reduction in the funds rate from 4.25 to 3.5 percent, that is 75 basis points. This, BTW, marked the greatest funds rate since 1990.

But then, such a move was aimed two-fold :
  1. To prevent a recession
  2. To prevent a panic global stock sell-off.
It might cause the opposite !

Because, the greatest rate cut in 18 years , AMIDST ALL THIS TALK OF RECESSION IN 3-4 COUNTRIES, would unnerve all.
Result: More and more people would sell off.
Leading to, of course.....more stocks slumping.

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