Are We Experiencing Another stock market Bubble? The role of market stability is very important for the entire world economy. The citizens of America deserve stable and reliable economy. They have a castle complex. Americans love their country, their homes and their government. American nation deserves security and governmental protection. Yet, according to recent statistic data over the past five years alone, housing prices, adjusted for inflation, have jumped at a remarkable 6.8 percent rate annually (Zuckerman).
What does it mean? Such jump is considerable higher that historical 1 percent.
No wonder that fear concerning a possible market bubble is an issue of the day. First of all, lets try to explain the meaning of stock market bubble. It is a kind of economic bubble that occurs in stock markets, when the bull market takes place in result of the actions of people driving by a herd behavior. The bull market, in its turn, usually results in stock market bubble. Can Americans be optimistic in their prognoses concerning future situation at the market? What are the best methods to define the signs of possible stock market bubble and consequently, a market crash? Are we experiencing another stock market bubble? The major part of economists considers that we are exposed to the threat of the stock market crash. In case we experience crash, it will certainly take a long time to overcome this period.
The Essay on Stock Market September Stocks People
September 11, 2001 was a day that Americans and the world for that matter will not soon forget. When two planes went into the twin towers of the World Trade Center and two others went into the Pentagon and a small town in Pennsylvania, the world was rocked. Everyone in the United States felt very vulnerable and unsafe from attacks that might follow. As a result, confidence in the CIA, FBI, and the ...
The economists dwell on collapse in the U.S. housing market. According to their opinion, the biggest real estate bubble in history (Neidenberg n.p.) is about to burst. They claim that prices are completely disconnected from fundamentals. The long term interest rates increase, whereas the salary gradually declines. Among other factors the economists enumerate surplus of speculators, shortage of people who buy houses for the first time, the fact that builders have to drop prices, the extreme use of leverages, to mention a few. First of all, long-term interest rates significantly increased. Zuckerman claims that, as far as everything is interrelated, more-expensive homes with larger mortgages have raised the cost of owning a home in New York from 25 percent of median income in 2000 to 38 percent today.
In Los Angeles, the price for owning the house has doubled. Only 6 percent of families with average income can afford to purchase a median-price house. Such worrying situation indirectly shows that we are in bubble. The next factor concerns the ratio of rent cot to ownership cost (Zuckerman n.p.).
The expenses such as mortgage and other taxes are much higher then the cost of rent. Sooner or later people will come to conclusion that it is cheaper to rent a house for $1,000 per month than to spend $500,000 on purchase.
Satiation is the third factor of bubble. The percent of houses remained unsold for a long period of time is high. If compared to the previous year statistics, the number of homes for sale has climbed by about 30 percent over the past year, and properties are remaining unsold for about 40 percent longer than a year ago (Zuckerman n.p.).
It seems that America experiences a housing boom. More than 25% of the jobs relate to the housing building. What is even more, n the past five years, housing has also provided about $2.5 trillion in cash for owners refinancing through home equity loans ($751 billion last year, twice the high point reached in the late 1980s) (Zuckerman n.p.).
These facts contribute to a imminent disaster: in case the prices are reduced, the flood of new money will become a trickle (Zuckerman n.p.).
The Business plan on Augustine Medical Inc Product Price Market
Introduction (Background and Situation) Augustine Medical, Inc. was founded by Dr. Scott Augustine, an anesthesiologist from Minnesota, in 1987. The company was created to develop and market products for hospital operating rooms and postoperative recovery rooms. The company provides innovative solutions to combat postoperative conditions such as hypothermia. Medical research indicates that 60 to ...
Situation concerning increased quantity of loans is also imposes a threat to our stability. Even light fluctuation in price can endanger the entire investments. This change can lead to decline of house prices; instable economy and other dangers. The government should undertake decisive measures and to put the axe on the helve. Reduce in consumer spending is also one of the factors that allow determining a bubble crash. According to Neidenberg, current consumer debt has reached record-breaking numbers and spending levels of consumers can no longer be sustained. The Dot-Com market is also not as stable as it could be. Although e-commerce and internet market was optimistically treated like a perfect solution for all problems, the new economy appears to be not as profitable as it was supposed to be. Bright ideas supported with no solid business plan, optimistic prognoses, mysterious words like internet-market, consumer-driven navigation, the examples of sudden success contributed to increase of investments in the Dot-Com market.
The investors didnt consider the cost-efficiency and prognoses of profitability and eagerly spend considerable amounts at dot-com dark horse projects. Careless attitude to business was not in coming. The companies started to report significant losses and some of them even folded outright within months of their offerings (The Dot-Com Crash, n.p.).
Internet businessmen had to leave their expensive estates. From 457 internet and technology related IPOs, which were created in 1999, 117 doubled in price on the first day of trading. Two years later, the quantity of IPOs decreased to 76, and none of them doubled on the first day of trading (The Dot-Com Crash, n.p.).
Some economists and analysts consider that the reason of this bubble was a case of too much too fast.
The same situation seems to occur today and can be also examined as one of the factors of current market bubble. Sometimes stock market bubble can result into a positive feedback. However, this time it seems that the country can face difficulties that can result in reduce of additional investments, further inflation, and other unintended negative consequences on our economy. References: Neidenberg, M. (Oct 5, 2006).
The Term Paper on Stock Market Crash of October 29, 1929
The year is 1929 and you're living life to the fullest possible. You are finally able to walk down the street in a fur jacket and diamond rings and hand 20$ bills to the bums of the city if you wanted to. It wouldn't be much use, because they would be nearly as rich as you would be. Even the people in poverty were somehow involved with or put money into the stock market. Nothing said you had to ...
As housing market falls: is $10 trillion bubble ready to burst? Retrieved October 23, 2006. http://www.workers.org/2006/us/economy-1012/ The Dot-Com Crash. Retrieved October 23, 2006. http://www.investopedia.com/features/crashes/crash es8.asp Zuckerman, M. Did Someone Say Bubble? Retrieved October 23, 2006. http://www.usnews.com/usnews/opinion/articles/0605 08/8edit.htm.
