Hello

It seems the US stock markets are in down trend.

What would be the major causes for that?

I would like to know also.

not following the US market, but might invest in it some day.

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It is a little bit challenging to make a comprehensive analysis about the situation. However, I believe that the US stock market is still going down because:

- a possible long term bearish US market (both dollar and the stock market going down) has been under discussion and speculation for so many years; now it's maybe time for that to happen;

- it is also said that the US economy has been financed quite heavily by foreign investors for many years; now the famous relationship of risk vs. return is more biased to potential risk(s) in the US economy (sub-prime type of financial risks, technological trap(s) lead by Bush administration etc.);

- huge, ever increasing trade deficit was said to be exploded sooner or later, either by a natural weakening of the dollar or by homecoming of the foreign investments - now it seems to have happened in both ways; so it's pretty much about TRUST on the US economy and the US dollar;

- having to some extent been also involved in derivatives market, I know that it is quite easy to create big risks with a relatively small original capital. The ongoing sub-crime crisis is a good example of the so-called domino effect in derivative markets. First there was just a normal "John James", who bought a house and who needed a mortgage. Second, there was a honest banker, who made it all happen for John. Third, there appeared a creative and clever financial engineer...and the rest is now almost history. One of the biggest risks in today's international financial market is the huge speculative market created and feeded by all kind of creative derivative instruments and markets. It has been throughout the history so that the creative people and creative ideas come first and the regulators are always couple of steps behind. Somebody will finally have the "bad card" in his hand;

- last, but in my opinion certainly not the least, vice versa, maybe the biggest reason for the recent drop in the US stock market is the very questionable pricing and the "investor relationship mechanism" typical for the "quarter economics" these days. All you need is a group of rather young MBAs, fresh out of commercial school, using DCF or whatever else similar kind of valuation models - there is the quidance. As an outcome and with help of ever increasing efforts and time spent by the CEOs and Investor relationships managers together with the above mentioned analysts and potential investors and with help of this naturally bullish relationship, eventually things start to escalate to other direction - sooner or later.

Somebody will certainly argue "that isn't it fair that a company gives as much as possible information for the investment society/private investors etc.?" As with so many other things in this life, too much is too much. I believe that the majority of the private investors (source of sustainable economics and growth anyway) would like to invest their money rather with a long term perspective. I quess the idea of establishing a stock market (public) was on the other hand to create an opportunity for companies to finance their operations with equity capital and on the other hand to find investment targets for investors. Without doubt the original purpose of the stock market is still on the solid ground. However, which should come first - the dog or the tail?

thanks for the info Daddy...

true

It will be some reason and US market is down.
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broos lee

I Will do agree with above mentioned This is So true

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Mr Dinar

yes,i also think that

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One of the reasons is now there is public trust in the share market now and in point of fact it is all regulators who did not become strict on investors and lenders, and what we call sub primes loans have been disbursed heavily to all both worthies and un-worthies as such loans did not get repaid and there were huge amounts of losses and the banks could do nothing.