Saturday, November 1, 2008

Is Trillion Dollar Fund disappeared from the Stock Market?

The fall of stock market in recent weeks raises the question, where the actual flight of money? Is not one cent out of any funds from the stock market.

Fall of the market share that has been started since September would have been to the world. Starting from Asia, Europe, the United States, even the Middle East all experienced dramatic fall. On average, stock markets around the world to decline to 30-50 percent compared to the year 2007.

The Fall begins from the sub-prime mortgage crisis in the U.S., which trigger the drag of liquidity that the financial sector fell.

However, according to John Sloman, economics professor from the University of Bristol, the market actually experienced a loss only 'paper' and not directly related to the loss of funds in cash. And this is related to decreasing value of the 'paper' itself.

"When we say trillion dollars have been lost, so this is actually the words of one," said Sloman in the interview with AFP on Tuesday (21/10/2008).

"What we should say is: trillion dollar value of capital markets has been destroyed. And this is really different because this is not the money, but value, which is the basis of the actual price that people would pay at a time," he explained.

Robert Shiller, economics professor from Yale University explained not compare with the decrease in the price of the house.

"For example, one day you ask property agents to estimate the value of your home if you will be sold. But the next day, ask your agent to estimate the value of the property both your home, and the two agents to estimate the lower 10 percent," said Shiller.

"What that means you lose money? Of course not, because the money that you have not changed so as the money in your account," he added again.

"But you will feel more poor. And the same is the case with the stock market. No one lost 'money' in the sense that the term, but they have lost their value," added Professor Shiller.

However, investors speculator can actually lose money if they try speculate in the middle of stock market turmoil that is very terrible.

A broker usually buy a stock with a poor performance because they speculate that the price of the shares have reached the lowest point, with the hope that they will sell it again after the price rise. However, sometimes it seemed stock prices slide down further.

"If you need to sell assets and the value of your assets are down, then you can lose money from the price you pay for this asset," said Sloman.

"You must distinguish assets, such as shares or cash from the house. Cash can vanish, but the value of assets such as the 'paper' (shares) and physical (home) down because they can depend on the demand and supply. But that does not mean no money is missing," Professor Sloman.

Bookmark and Share Join My Community at MyBloglog! Add to Technorati Favorites Stumble Upon Toolbar


Template by - Abdul Munir | Daya Earth Blogger Template