Reasons for US Crisis


By

C. Kamaraj
S. Mohammed Azarudeen
II Year MBA (Batch 2007-09)
R.L. Institute of Management Studies
Madurai-625 022
 


Traders are not interested in taking risk so, they have started investing in short term investments but this short term investment will not give return for longer period of time.

BENEFITS OF LONG TERM INVESTMENT:

* Time can be investor's best friend because it earns compound interest and adds to their principal.
* Long term investment gives high dividend to the investors.
* Reduction of the impact of price fluctuation.
* When comparing with short term invertor's, the long term investor's are tension-free.

REASONS FOR U.S FINANCIAL CRISIS:


U.S Banks started giving a low credit quality to their ninja customers and the bank did not able to receive their money back and at the same time the investment banks have converted their loans into CDO's (Colatral Debt Obligation), and they have insured their CDO's with insurance company (AIG) and they have issued their CDO's to their investor's for high returns.

Finally the customer are not able to repay their loan to U.S bank and they have sold their home in low price. In this case, U.S bank, Mortgage company, Insurance company, Investment bankers have been totally collapsed.

REASONS FOR BEARISH STOCK MARKET: ( Jan 2008 Sep 2008)

* Cancellation of agricultural loans in budget 2008 has affected the banking sector.
* Because of U.S sub-prime crisis, our indian stock market also got affected.
* U.S dollar depreciation has affected the indian IT sector and it reflected in stock market.
* Indian inflation rate touches 12.4% and it also one of the reason which affects our stock market.
* Crude oil price reaches $145 per barrel.
* Lehmann bankruptcy ia also one of the reason for bearish in stock market.
* Hedge funds and FII's are the biggest seller in indian market.

From the above reasons we can able to understand that long term investment is more better than short term investment. The market may be bullish or bearish but the investors should not get panic and so, that they can earn money in long term.

CONCLUSION

We can not predict the short term movement of stock market. Likewise do not believe in market sentiments and rummers and now government and RBI have taken necessary step to help the stock market by reducing the CRR rates which will be helpful for the recovery of the stock market. This is the apt time to invest in stock market. So, don't be greedy in short term investment and at the same time don't get fear to invest in the long term.
 


C. Kamaraj
S. Mohammed Azarudeen
II Year MBA (Batch 2007-09)
R.L. Institute of Management Studies
Madurai-625 022
 

Source: E-mail November 15, 2008

 

         

 

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