What are the problems in the stock market? What are the problems in the stock market

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The stock market is an interesting animal.  There have always been problems and opportunities.  The day trading boom changed the stock market dramatically.  People no longer had to have access to an inside man or a position on the stock market.  The internet allowed them to do research, and companies...

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The stock market is an interesting animal.  There have always been problems and opportunities.  The day trading boom changed the stock market dramatically.  People no longer had to have access to an inside man or a position on the stock market.  The internet allowed them to do research, and companies like etrade were more than happy to facilitate the process.  Did this contribute to the volatility of the stock market?  I think that it did.  The stock market was always volatile, but this is a whole new ball game.

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If you are referring to the current problem with the stock market, it has to do with the financial collapse of the sub-prime mortgages that came through Fanny Mae and Freddie Mac. 

These mortgages were bundled and sold as securities and were bought by many investment houses thereby allowing the crisis to reach deep into the financial system beyond the bank that lent the money to the people who were unable to pay the money back.

In response to this shock to the market, many investment houses went out of business, suddenly finding that their assets had no value.  Additionally, the credit market tightened up considerably in response to the bad credit that was dominating the news.  Suddenly, people who had good credit could not borrow money either because all lending institutions were afraid to lend anyone money, even bank to bank lending was tightened.

The stock market is a reflection of the future, it is highly sensitive to any movement by the federal reserve, or numbers in the job market or consumer spending. 

The stock market is a measure of the health of the economy.  When things are bad, the bears, or the sellers dominate the market.  If everyone sells or dumps their stock, bonds, etc, the market goes down because the value of the investments go down.  That is how the market loses so many points in a single day. 

Literally the value of the investment instrument has been lowered by the fact that no one wants to own it. 

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