Is Tanzania Safe? Will the Global Economic Crisis Spare the Most Vulnerable Economies?
Former U.S. Federal Reserve Chairman Alan Greenspan told Congress on Thursday he is "shocked" at the breakdown in U.S. credit markets and said he was "partially" wrong to resist regulation of some securities.
The root cause of this global financial
crisis is indeed a man made scenario and did not happen overnight. It started with securitization or what they call financial engineering where creativity in the financial market occurred. Bundling and unbundling and packaging of financial products, they also call them instruments entered the era of creative arts and speculative market of the new generation. Derivatives and credit swap defaults were born to join the existing Mortgage-backed securities (MBS) and collateralized mortgage obligations(CMO); all these were considered HOT PRODUCTS of our time especially when backed by the US government or AAA ratings. With the backing from the US government everybody felt in love with them and invested heavily; the Chinese came in too grabbed all kinds of US government T-bills and T-notes, bonds, and securities, speculators saw home values rising and speculated on more homes based on interest only mortgages, and banks saw fortunes in home loans and enjoyed without caution. At Wall Street, things went so well too. Times were good for everybody and we all loved it. Now the global financial market suffers, blame on deregulation or find someone to blame. Where was the government? probably making money on securities and whatever it could sell like most people did, right? Now it comes back and takes over banks, but at least it prevented most of the banks from going under with your money. right?I hope the government doesn't run out of money. Is this the collapse of capitalism or the test on capitalistic free financial markets? Or time to redefine capitalism? I thought privatization was intended to rescue poor performing government ran sectors in Tanzania. What happened to the privatization Mkapa and the alike implemented in Tanzania? Oooh!, not a very good move, another caution to developing economies. Tight regulations; very important but how tight for free financial markets to function? May be oversight to keep an eye on creative ways of making money in the financial world (financial engineering) or financial manipulation.
I hope financial products like MBS, CMO, Credit Swap Defaults and all derivatives alike haven’t arrived in Tanzania yet, or will not or scare the hell out of Tanzanians. But of course the impact of this economic crisis will be felt in Tanzania as well. Tourism industry will feel it, Export will be affected, Investors will stop funding their overseas expansions, donors will hold onto their money, BUT DURING THIS TIME, CASH IS THE KING. HOLD ONTO YOUR MONEY.
Crisis explainer (UNDERSTAND THE CRISIS)
http://www.youtube.com/watch?v=eb_R1-PqRrw
Untangling credit default swaps (WHAT ARE CREDIT DEFAULT SWAPS)
http://www.youtube.com/watch?v=DdEI6PkGZK8&feature=related
how do we measure fear in these tough times? Volatility comes in.
Volatility refers to the degree of (typically short-term) unpredictable change over time of a certain variable also known as the rate and magnitude of changes in price. Volatility is often viewed as a negative in that it represents uncertainty and market risk. When the market is calm, volatility is typically low. High readings on the Volatility Index typically represent a fearful marketplace.
September was the most volatile month in memory, more bad financial news than good news. Major events happened in one month alone. Volatility and fear continued to rise. However, with October 3, 700+billion bailout bill approval by the congress, financial markets continue to struggle. October 6, the Dow Jones industrials dropped more than 700 points and fell below 10,000 for the first time in four years. Global financial crisis does not seem to come to an end. Economists predict could be a long and deep economic downturn. Vast majority of the time, if the Big Three US stock indices are up, volatility is always low. Currently, volatility has remained high with unexpected financial markets; worries over credit markets, disappointing earnings updates is the US and news about job loses, bank failures in the US and Europe.
If what we call big investors and major donors to the most vulnerable economies like Tanzania and the alike struggle to keep their financial markets functional, will the poor economies be spared? YES & NO. Former U.S. Federal Reserve Chairman Alan Greenspan told Congress today he is "shocked" at the breakdown in U.S. credit markets and said he was "partially" wrong to resist regulation of some secur
ities. Financial crisis 'like a tsunami' "A once in a century tsunami" Greenspan said.
October 16, Chicago Board Options Exchange (ticker symbol VIX) set a record high above 70 percent yesterday 81+ reading was comfirmed a bad print by CBOE spokesperson. This so-called "fear gauge" was as low as 20-25 percent right through August. VIX is negatively correlated with S&P 500. The high VIX, the lower S&P 500.
As major companies like GM and the alike report losses and low earnings, they pump fear and influence VIX reading as stock prices plunge.
VIX is effectively a proxy for general sentiment in the markets, it tends to move in lockstep opposition to the major indices. Whenever the stock markets are up, people grow complacent and fear wanes. This leads to a lower VIX. Conversely when the major stock indices slide lower, fear gradually begins to grow faster within investors and speculators.
Usually inverse relationship between the stock markets and the VIX is well known and heavily studied. The anomaly of the VIX Divergences arises when this relation
ship breaks on a material change in the stock indices. For example, what if the US stock markets and VIX are both up or both down by material amounts on the same trading day? These rare days do indeed occur and are the perplexing VIX Divergences! VIX translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis.
The price of call options and put options can be used to calculate implied volatility, because volatility is one of the factors used to calculate the value of these options. As more bad news about the financial markets keep coming, Volatility Index reads high as fear among investors rises. Other volatility or Fear Gauges are:-
•CBOE NASDAQ Volatility Index-(ticker symbol VXN) -The VXN is a measure of implied volatility for the Nasdaq 100 (NDX).
•The DJIA Volatility Index (ticker symbol VXD)-calculated from prices of near-term Options on the Dow (DJX) traded at the CBOE. NOW WE KNOW WHAT VOLATILITY (FEAR)MEANS.
The root cause of this global financial
crisis is indeed a man made scenario and did not happen overnight. It started with securitization or what they call financial engineering where creativity in the financial market occurred. Bundling and unbundling and packaging of financial products, they also call them instruments entered the era of creative arts and speculative market of the new generation. Derivatives and credit swap defaults were born to join the existing Mortgage-backed securities (MBS) and collateralized mortgage obligations(CMO); all these were considered HOT PRODUCTS of our time especially when backed by the US government or AAA ratings. With the backing from the US government everybody felt in love with them and invested heavily; the Chinese came in too grabbed all kinds of US government T-bills and T-notes, bonds, and securities, speculators saw home values rising and speculated on more homes based on interest only mortgages, and banks saw fortunes in home loans and enjoyed without caution. At Wall Street, things went so well too. Times were good for everybody and we all loved it. Now the global financial market suffers, blame on deregulation or find someone to blame. Where was the government? probably making money on securities and whatever it could sell like most people did, right? Now it comes back and takes over banks, but at least it prevented most of the banks from going under with your money. right?I hope the government doesn't run out of money. Is this the collapse of capitalism or the test on capitalistic free financial markets? Or time to redefine capitalism? I thought privatization was intended to rescue poor performing government ran sectors in Tanzania. What happened to the privatization Mkapa and the alike implemented in Tanzania? Oooh!, not a very good move, another caution to developing economies. Tight regulations; very important but how tight for free financial markets to function? May be oversight to keep an eye on creative ways of making money in the financial world (financial engineering) or financial manipulation.I hope financial products like MBS, CMO, Credit Swap Defaults and all derivatives alike haven’t arrived in Tanzania yet, or will not or scare the hell out of Tanzanians. But of course the impact of this economic crisis will be felt in Tanzania as well. Tourism industry will feel it, Export will be affected, Investors will stop funding their overseas expansions, donors will hold onto their money, BUT DURING THIS TIME, CASH IS THE KING. HOLD ONTO YOUR MONEY.
Crisis explainer (UNDERSTAND THE CRISIS)
http://www.youtube.com/watch?v=eb_R1-PqRrw
Untangling credit default swaps (WHAT ARE CREDIT DEFAULT SWAPS)
http://www.youtube.com/watch?v=DdEI6PkGZK8&feature=related
how do we measure fear in these tough times? Volatility comes in.
Volatility refers to the degree of (typically short-term) unpredictable change over time of a certain variable also known as the rate and magnitude of changes in price. Volatility is often viewed as a negative in that it represents uncertainty and market risk. When the market is calm, volatility is typically low. High readings on the Volatility Index typically represent a fearful marketplace.
September was the most volatile month in memory, more bad financial news than good news. Major events happened in one month alone. Volatility and fear continued to rise. However, with October 3, 700+billion bailout bill approval by the congress, financial markets continue to struggle. October 6, the Dow Jones industrials dropped more than 700 points and fell below 10,000 for the first time in four years. Global financial crisis does not seem to come to an end. Economists predict could be a long and deep economic downturn. Vast majority of the time, if the Big Three US stock indices are up, volatility is always low. Currently, volatility has remained high with unexpected financial markets; worries over credit markets, disappointing earnings updates is the US and news about job loses, bank failures in the US and Europe.
If what we call big investors and major donors to the most vulnerable economies like Tanzania and the alike struggle to keep their financial markets functional, will the poor economies be spared? YES & NO. Former U.S. Federal Reserve Chairman Alan Greenspan told Congress today he is "shocked" at the breakdown in U.S. credit markets and said he was "partially" wrong to resist regulation of some secur
ities. Financial crisis 'like a tsunami' "A once in a century tsunami" Greenspan said.October 16, Chicago Board Options Exchange (ticker symbol VIX) set a record high above 70 percent yesterday 81+ reading was comfirmed a bad print by CBOE spokesperson. This so-called "fear gauge" was as low as 20-25 percent right through August. VIX is negatively correlated with S&P 500. The high VIX, the lower S&P 500.
As major companies like GM and the alike report losses and low earnings, they pump fear and influence VIX reading as stock prices plunge.
VIX is effectively a proxy for general sentiment in the markets, it tends to move in lockstep opposition to the major indices. Whenever the stock markets are up, people grow complacent and fear wanes. This leads to a lower VIX. Conversely when the major stock indices slide lower, fear gradually begins to grow faster within investors and speculators.
Usually inverse relationship between the stock markets and the VIX is well known and heavily studied. The anomaly of the VIX Divergences arises when this relation
ship breaks on a material change in the stock indices. For example, what if the US stock markets and VIX are both up or both down by material amounts on the same trading day? These rare days do indeed occur and are the perplexing VIX Divergences! VIX translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis.The price of call options and put options can be used to calculate implied volatility, because volatility is one of the factors used to calculate the value of these options. As more bad news about the financial markets keep coming, Volatility Index reads high as fear among investors rises. Other volatility or Fear Gauges are:-
•CBOE NASDAQ Volatility Index-(ticker symbol VXN) -The VXN is a measure of implied volatility for the Nasdaq 100 (NDX).
•The DJIA Volatility Index (ticker symbol VXD)-calculated from prices of near-term Options on the Dow (DJX) traded at the CBOE. NOW WE KNOW WHAT VOLATILITY (FEAR)MEANS.
posted by TANZANIA AND THE WORLD ECONOMY | 9:04 AM
|
1 comments
