What does this all mean?

Ok, first off, im 19, i dont really know too much about the markets, and im sure alot of people dont. I do know how, in general, this is a major event in my, and the rest of our lives, as (i assume) this will lead to raising prices in bassically everything and so on.

However, I cant grasp the full impact on this because of all the mixed and contrivercial messages flying around these forums.

SO! I have a question that needs a detailed answer. If our markets do fail (even for a short while, and then slowly recover) what will this all meen on economy, prices, homes, school, and so on?



[edit on 8/10/08 by Ghost147]

Well, I'm thinking there are two scenarios here as far as the market, and the coming "greater depression"

1) Stocks plummet, we enter into a severe recession for a few years, until the full impact of the collapse is felt (anywhere from 1 yr to 5 years). Real estate value will drop some more, mostly because credit will be really difficult to achieve, so sellers will have to sell at a price to attract "cash" buyers. meanwhile, various world governments set up humanitarian programs, and manage to scrape enough food and the like together to minimize the deaths due to starvation.

or... 2) The results of the massive bailout means the government is so far in debt, there is no hope for federally sponsored humanitarian programs to grab a foothold. starvation and disease becomes rampant, and the entire world becomes what we would consider "third world".

neither sound very optimistic, and hopefully I will be pleasantly disappointed.

In the meantime, while the markets are on their death spiral, you will see some direct impacts on your day to day life... Most companies/services are owned by a few larger companies. if one of those major institutions goes under, you will see things disappear that you never expected. for example AT&T, Yahoo, Southwestern bell, etc etc, are all the same company. If the parent company goes bankrupt, your cell phone or internet may shut down*.

Anyway, hope that answered your questions without too much doom/gloom


*I think its important to state I only mentioned those companies as an example... NOT a prediction...

reply to post by Ghost147


Well the "Stock Market", reflects investors sentiments about companies in general. Financial reports inform investors that a company is profitable or not, ergo future profits or forecast are adjusted accordingly. If previous forecast profits do not reflect current profits this is bad, the price drops. So stocks fall because investors feel that returns will not match what is expected. So they dump stock, and those that have purchased the stock at a cheaper price have done so, having already discounted these future returns. The problem arises when the NEW stock holder for these companies feel that the purchase of the stock at the discounted price was not enough, and re-sell it back, because they think the company's stock is still overvalued, and the foretasted profits was not low enough. The fluctuations that you are witnessing of up and down is because investors are not sure of the price, because of all the uncertainty that's going on particularly in the debt markets. Credit is needed by many companies to invest in new plant and equipment and future job growth, which in turn create greater productivity.

When the stock market moves DOWN, it means future SLOW DOWN in growth. In essence the "Stock Market" provides an insight into the future, i.e. what the future holds for the economy. The STOCK MARKET is not the cause of economic slowdown, instead it provides a picture of HOW THE ECONOMY is doing or going to do in the FUTURE.