1. Your Questions About Stock Market
Mandy asks…
How do Korean stock market stay independent from US stock
market?
Korean stock market is very connected with US stock market. Due to subprime mortgage
loan, Korean stock market got damaged a lot. Since subprime mortgage loan, I have been
interested in this for so long time. Please tell me how Korean stock market stay independent
from US stock market.
Steve Winston answers:
The simple answer is - it can't. You've heard of the global economy. Well there is also a global
stock market. What affects the largest stock market (and economy) in the world, also affects
other stock markets. But when the u.s. Market goes up, it likely also helps the S Korean market.
I recall in the 90's, the Korean economy had a meltdown. This affected other asian economies &
took down asian markets. The u.s. Market also went down in sympathy with other markets.
It would be nice if political events & economic events (in other parts of the world) did not affect
one's local market. But in truth, it just doesn't work that way.
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2. Thomas asks…
How does the housing market affect the stock market so much?
I heard that the housing market being low in sales and with the forclousure market crashing, it
is affecting investors so much that they are moving money out of equities (stocks) and investing
more in safer investments. Thats why the stock market has been down so much in the past
week.
How does this happen? I was reading about it, but I didn't really understand. Are investors
pulling out their stocks from big lenders? How exactly does it affect the stock market? I need
help understanding it in normal terms that make sense.
Please advise, thank you!!
Steve Winston answers:
It's purely psychological. The "housing market" is really the "real estate" market which accounts
for a lot of money. There is also a lot of related industries which is affected if the real estate
market goes down. First is the home builders or construction industry (contractors), then there is
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3. the materials suppliers, then the mortgage industry which makes loans to buyers and then
there's the real estate agents, title companies, escrow companies, home insurance companies,
furniture companies - all their jobs hang on how well the housing market is doing. They were in
fear for the past 2 years when the housing or real estate market peaked and began sliding
down. Investors in the stock market finally decided that there is too much fear and decided to
sell their stocks. Selling causes the stock market to drop.
Jenny asks…
What was the PE of the stock market before and after the stock
market crash of 1929?
What was the PE of the stock market before and after the stock market crash of 1929? What
I'm really wondering, was that stock market really a "bubble" crashing?
Steve Winston answers:
No, the P/E ratio didn't really collapse - but profits collapsed as well. See
http://www.econ.yale.edu/~shiller/data/stock%20data%20annual%201871-2003.htm for
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4. historical data.
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