What Does The Latest Stock Market Crash Mean

After the Dow Jones fell to the smallest level since 1997, the investors can find that buying shares of some global icon companies can be cheaper that buying the products of those companies.
One obvious example is the banks sector. As we previously mentioned here on doitinvest.com, Citibank has been basically nationalized by the government which now owns the majority of the ownership. Their share price has crashed to $1 per share, from a maximum of $27 in the last year. At this price you can buy plenty of shares since basically investors are all trying to get rid of them. But do you have the stomach for such a risk? Because, after one month, those shares might be worth nothing, and you still could loose all the money you invested there.
Many analysts say that the situation is the opposite of the one saw 2-3 years ago. If the technical analysis of the market ruled in 2007, now “you can’t trust those balance sheets anymore”, says one investing analyst. And to complicate it even more, some shares are rising more than normally simply because the investors have to put their money they plugged out of the banks, in order to get some yields. This is why some companies like Dollar Tree (a discount retailer)or the restaurant chains saw some big increases in their share prices, often not justified.
But the market crash generated other paradoxes. In the auto industry, the crash has not yet propagated to the spare parts suppliers. Only the auto manufacturers are now crashed, whilst their suppliers have started the decline, but are not yet there. At today’s closing price of $1.45, it would take about five shares of General Motors Corp. to buy a $7.99 Bosch Iridium- Fusion spark plug for a four-cylinder Chevrolet Cobalt, according to AutoZone Inc.’s Web site.
A Sunday edition of the New York Times sells on city newsstands for $4, seven cents less than the cost of one of the publisher’s shares. A share of Tiffany & Co. also doesn’t go very far. The world’s second-largest luxury jeweler has dropped 56 percent in 12 months after consumer spending fell in last year’s third and fourth quarters. At $17.21, two shares will cover the $32.51 price, including sales tax, for hand-engraving initials on a $115 sterling-silver money clip, according to the store’s Web site.
Some of these shares are clearly suffering because of the stock market retreat. It is clearly the case of luxury and fashion goods, which in recession do not sell very well, making the shares of the companies plunge too much. Now the question is – which ones of those shares will come back and which companies will disappear forever? After all, this makes the difference between a skilled investor and a poor one…

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