Serwer: Pain, yes, but not terminal
The market is in for a crunch this morning, but you shouldn't worry too much ... here's why.
Sign up for the Streetlife e-mail newsletter NEW YORK (Fortune) - "Don't worry, baby," as the Beach Boys would sing. "Everything will turn out alright." It looks scary out there, but fear not, this too shall pass. Here's what's going on: The U.S. market tanked yesterday because of 1) higher oil prices; 2) weak earnings (which carried on after the bell ... see Yahoo (Research)! and Intel (Research)); and 3) the plunging market in Japan. And U.S. stocks are generally very weak this morning and are falling at the open. Pain, but not terminal. Here's why: oil's been rising and falling for months. Years! Nothing new there. Ditto for earnings. Same old story. Japan is different, but not that different. The market meltdown there was precipitated by a scandal concerning a little-known Internet company called Livedoor. It's sort of a Google/Yahoo! deal -- you can check out its Web site. Like so many Japanese companies, Livedoor has tentacles in all sorts of other businesses, in this case media businesses like TV and books. But here's the thing: 1) Livedoor is pretty small -- only $278 million of revenues in 2004; 2) The Japanese market was due for a correction -- it was up more than 30% in 2005, way outpacing U.S. stocks; and 3) Japanese stocks and U.S. stocks aren't particularly correlated over time. (See 2005 and the entire 1990s.) So a bumpy ride today, but don't think the sky is falling. ______________ |
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