what caused the stocks to crash between aug 15 and aug 17
- Anonymous1 decade agoFavorite Answer
Well you don't consider it a crash. A correction of 10% from the high during a year is considered a correction. I believe that a decline of 25% is considered a crash. The main thing behind the drop is the issues with sub-prime lenders. The mortgage companies who cater to borrowers with shakey credit. A lot of these buyers were approved because of the high flying housing market. The lenders figured that even if they foreclose they will still make 10% per year on the house so they didn't worry. Many of these borrowers chose teaser rates, where they only pay interst at 1% for the first year and then the difference between the real interest rate and the princiople is added after year one, thus they owe more than they borrower. The default level was always known to be hight on these loans and without a red hot housing market the lenders have a lot of property in default that they don't want to take back.
- 4XTraderLv 51 decade ago
The answer that most will give is the meltdown in the sub-prime (and real estate market) market. Although I do believe the meltdown in the housing market is contributing, the "crash" you saw is due to several cycles all converging about now and the fact that this bull has run it's course. What you was from Mid July till now is just the beginning. I think the market will rally till about Mid-Sept and then experience a very fast and violent sell off in Sept/Oct. Prices will probably stabilize and may even rally, but I would not consider this a buying opportunity as it will most likely just be a counter-trend. I suspect it will be the beginning of a secular bear market that will last till the year 2022 or 2024 and shave as much as 13,000 points off the Dow in total, ie, the Dow will probably be trading in the 1,000 point range at the end of this bear cycle.Source(s): I trade derivatives & fx.
- Anonymous1 decade ago
The stocks did not crash. The stock market declined more than is usual, but it cannot be considered a crash. One can only speculate why it happened, and there are many reasons all coming together. One of the main ones is the problem with sub-prime loans whose troubles can spread to many parts of the economy.