By Neville Bennett
Friday 27th September 2002 |
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The Fed acknowledged the risk. Concerns about the effects of a war with Iraq have generated uncertainty.
The price of oil has surged over the $US30/bbl mark a level linked historically with recession.
When the Dow shed 180 points to finish at 7683 (Wed, NZ time) it was at a four-year low. It has lost 42% in two years.
The Nasdaq is 76% off its high and at a six-year low. Its sorry performance illustrates the mayhem a bear market can inflict on tech stocks. The bad news is the bear has now got into other fields.
Aviation in the US is also a wreck, with some carriers filing for bankruptcy and others likely to follow.
Most aviation stocks can be bought for about $2. British Airways is also cheaper than it has ever been.
Perhaps the most troubled sector will prove to be insurance. Its companies need large reserves of capital earning a good yield to meet their obligations. Most have a substantial share portfolio.
When indices fall 40%, they have to decide whether to hold or sell to limit their losses. Much selling is now occurring and a panic is possible.
If insurance companies hold shares they have difficulty in sustaining their capital base, as AMP has discovered. In London, the huge Royal & SunAlliance has traded at its lowest level since September 1984.
London's blue-chip FTSE 100 has touched a six-year low of 3609. Banks, insurance, telcos and oils have led the way.
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