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Issues and Experts: ADDITIONAL INFO: TSX crash explained
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August 17, 2007
Making sense of market volatility
What's behind yesterday's TSX crash? Economics professor David Andolfatto says financial institutions greatly underestimated the risk associated with the sub-prime mortgages they recently started offering to high-risk clients. Many of those mortgages were packaged and sold to financial institutions around the world, including Canada, and those institutions are now suffering big capital losses as people can no longer make their mortgage payments and foreclosure rates rise. "People want to get out of companies who have large exposure to this product. At the moment, nobody is quite sure who is holding what, so almost all financial institutions are getting side-swiped, and other stocks alongside, as the fear of recession grows. Offsetting all this is the fact that global growth continues to be strong and that many companies are still making lots of money. People don't know whether to run for the exits, or use lower stock prices as an opportunity to buy these stocks on the cheap."
David Andolfatto: 778.782.5825; dandolfa@sfu.ca
www.sfu.ca/~dandolfa
ADDITIONAL INFO--TSX crash
SFU Business professor Andrey Pavlov, currently a visiting professor at the University of Pennsylvania's Wharton School, can also comment on the topic, with an explanation of how the US mortgage industry works, what actions made the lending industry vulnerable, the outlook for U.S. and Canadian housing markets, and possible outcomes of the current crisis.
Andrey Pavlov, Business: 215-573-0453, (c) 604-763-3696, apavlov@wharton.upenn.edu
What's behind yesterday's TSX crash? Economics professor David Andolfatto says financial institutions greatly underestimated the risk associated with the sub-prime mortgages they recently started offering to high-risk clients. Many of those mortgages were packaged and sold to financial institutions around the world, including Canada, and those institutions are now suffering big capital losses as people can no longer make their mortgage payments and foreclosure rates rise. "People want to get out of companies who have large exposure to this product. At the moment, nobody is quite sure who is holding what, so almost all financial institutions are getting side-swiped, and other stocks alongside, as the fear of recession grows. Offsetting all this is the fact that global growth continues to be strong and that many companies are still making lots of money. People don't know whether to run for the exits, or use lower stock prices as an opportunity to buy these stocks on the cheap."
David Andolfatto: 778.782.5825; dandolfa@sfu.ca
www.sfu.ca/~dandolfa
ADDITIONAL INFO--TSX crash
SFU Business professor Andrey Pavlov, currently a visiting professor at the University of Pennsylvania's Wharton School, can also comment on the topic, with an explanation of how the US mortgage industry works, what actions made the lending industry vulnerable, the outlook for U.S. and Canadian housing markets, and possible outcomes of the current crisis.
Andrey Pavlov, Business: 215-573-0453, (c) 604-763-3696, apavlov@wharton.upenn.edu