With fears of a credit crunch coming to haunt the economy, the Australian All Ords fell 311 points or 5.4% during trade yesterday, only to make a good recovery in the afternoon. With records for the biggest fall since Sept 11th broken several times in the past month, yesterdays fall was the biggest since the Tech Wreck, an era when Tech stocks were so bloated, but "It was different this time"(TM). This was the new economy, a time when burning cash and not making any profits didn’t really matter.
Funny that not long ago, with global housing market so bloated, the same phase was circulating. "It is different this time" House prices can only continue to go up faster than inflation. It doesn’t matter if household’s debt increases exponentially, it doesn’t matter if you can’t afford the loan, or you pay huge portions of your disposable income into mortgage and rent payments, that there is nothing left to pump into the general economy towards goods and services. It doesn’t mater if effectively you strangle the economy or you spend more than you earn year in year out.
Overnight the US market took a similar slide followed by a recovery. The Dow Jones fell 344 points or 2.7% before recovering later in the session.
» Wall St up and down as Aust dollar slumps – The ABC, 17th August 2007.