By: Alen For the past 1 year, the global financial market was in turmoil. Now, it is still very unstable. It started as an US problem and later the contagious effect spread to the whole world. It started long way back when US housing market was booming. The bank packaged many creative product like subprime loan. Financial institution lend to those without good credit record, package the loan into securities and sell to investor. When the subprime borrower default, it cause ripple effect on financial market. Bank bought those subprime product suffered big loss and need to recapitalise. Housing market slump and cause more borrower to default. Credit become precious and banks became careful in lending to each other. The lack of credit would choke the economy and this became a very serious problem. When the banks are not functioning, the economy is not functioning. The main problems are credit crunch and mortgage base asset losses. Housing market suffered and economy outlook looks dark. Therefore stock market keep plunging, in sync with the outlook. It is like a vicious cycle, the falling asset price cause more loss and in turn cause asset price to fall further. We are at the so called de-leveraging cycle. It is very painful to unwind all the credit in such a short frame of time. Because of the weak outlook, the commodity price - hard or soft is coming down. As the investors turn risk adversed, attention is on gold and this is the only asset where price is going up. The cyclical industry turns down first – properties, shipping etc. When property was hot and money is easy, when the foreigner are buying high end property like no tomorrow, analyst keep adjusting their forecast and target price. The ever surging commodity price – oil, palm oil, soya bean, corn, iron ore cause port congestion, analyst foresee a long time boom, thus shipping stock flying high. Look at what happen to them? Analyst forecast is usually too reactive. Read more...