Tuesday, November 03, 2009

Financial markets and the possibility of a crash! Series 2

Second in a set about the financial markets in Canada

Depression was a result of many factors.In that the Market had crashed, the companies who used to be traded, had now shares that had no monetary value ( read Nortel ).

In that the Banks had no faith in these companies, because they had nothing that would show a positive collateral value, they could not raise funds to operate.

The words "Credit Crunch" were used liberally on the old film clips. Additionally, as these companies also had no ability to produce product, their markets shrank or actually disappeared completely. This gave rise to a continuum of layoffs and plant closures.At that point in time, the general public lost faith and just stopped buying anything except necessities.

Additionally, at that time, Credit was becoming a household word, people had borrowed money to get into the "can't lose Stock Market" and now could not pay it back. This resulted in multiple foreclosures, no building, no buying.

The rest is History, save and except a few enterprising people who had stayed out of the Market and were Cash rich.

They went out, cash in hand and bought up any Real Estate that had a potential for recovery and also expensive Automobiles that they put away and sold at huge profits when the Economy returned to normal.

All too familiar....No?

I hope this finds you Happy and Healthy!

All the Best!


A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

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