ANNOUNCED THE STOCK MARKET CRASH

The current bubble would be the daughter of the euphoria of Wall Stretto (and by extrapolation from the rest of world stock) following the results of so-called "stress test" of financial institutions conducted by the U.S. administration, the arrival of small and medium investors following the bursting of the housing bubble and the dramatic decline in yields of Mutual Funds and Fixed Income and especially the return to the city’s brokers speculative virtual bargain hunting after the collapse of oil prices and agricultural commodities.

GENESIS OF THE BUBBLE:
Bounded rationality: The disconnect with reality on the part of investors would take to justify the irrational exuberance of the markets (creating a virtual world of financial speculation had nothing to do with the real economy) and extrapolate the current yields a lifetime right which together with a loss of credibility rating agencies like Moody’s (by not have predicted the current crisis), contributes to the market to remain insensitive to cut rating of the companies listed on the stock.

Speculation: The process encourages speculative buying in the hope of substantial gains in the future, causing an upward spiral away from any evidence base, what paradigms would like Vueling or Spanish values of zinc in the Ibex 35, Fortis and Renault in the Eurostoxx 50 and American Express in the Dow Jones. Thus, the price of the asset is thus able to reach stratospheric levels until just bursting the bubble (crash) due to massive sales of assets and the absence of buyers, causing a sudden and sharp fall in prices (up to limits below their natural level), leaving behind a trail of debts (stock market crash)

Uncertainty about the level ground of securities: An investor is willing to pay a price for a stock if it reports money in the future, so that the value of that action is the total expected cash flows. The ground level of world stock markets (which converge at the minimum benefits and multiplier effects), would be located in the fork of the 8000 and 9000 items in stock markets as the Dow Jones, Nikkei or the Ibex 35, due to increased virulence and depth that has the economic crisis and far from the current stratospheric ceilings, recalling values in October 2008.

Rebound in commodities: The overall recovery in commodity prices could reflect a change in the trend of economic conditions in the global arena. Thus, the price of these products rose 11 percent on a month-to, with the oil prices which reported the biggest monthly rise, followed by soybean and wheat and the new upward trend in agricultural products not only influences the recovery oil, but also play some temporary factors, such as bad weather conditions (drought, lack of humidity and low temperatures) recorded in the main producing areas of the world and the return of speculation from the hand of investment funds . (ETF ETF Commodities CRB and CRB Non-Energy Commodities of Lyxor).

End of the upward rally: Investors have started to feel dizzy height and question the state of solvency of the companies. (Given the high indebtedness of the same in some cases exceeding 200% in relation to its value added in 2009). Thus, companies listed on the Spanish stock exchanges have financial commitments of EUR 276.532 million (representing 3.1 times the gross profit they’re getting this year) and is expected to lower the percentage of business performance that allocated to dividends and the number of companies that shared the same.

Possible stock market crash: The euphoria of Wall Stretto (and by extrapolation from the rest of world stock) following the results of so-called "stress test" of financial institutions conducted by the U.S. administration and the drip of negative economic data below the most pessimistic forecasts would have helped the overweight of the green shoots of the economy (up 3% of U.S. GDP for 2010 and marked improvement in results of the Banks and Wall Stretta).

It would thus produced a change in expectations, there is now convinced that the bailout policies (Program of Support for troubled assets (TARP) carried out by the government and the successive reductions in interest rates of Fed would have eased the liquidity problems of financial institutions, but not prevent banks are capitalized and continue to need more capital injections due to the existence of emissions in the housing sector (mortgage bonds) and bad assets (subprime mortgages) that must be purchased by the bad banks (banks bad) or continue with the trickle of nationalizations, practices that involve both a loss of free competition.

This together with the continual increase of foreign debt will help to increase the risk premium and credit is still not flowing normally to real interest rates, which coupled with the fact that yield differentials between the public debt issues between the various first world countries have increased in recent months (which implies a higher cost and greater difficulty obtaining external financing), the adoption of extraordinary measures such as implementing quantitative measures (Quantitative Easing) to increase the monetary base and the devaluation the dollar to stimulate exports could exacerbate the obvious risk of stagnating economic crisis in the U.S..

In addition, the announced interest rate hike by the Fed and the ECB would have an immediate impact on mortgages and bank loans, thus choking broad economic strata and a dramatic increase in delinquencies and foreclosures and local which together with the trade surge in oil prices could lead to episodes of stagflation (the Consumer Price Index (CPI) for the United States rose in 2009 at 2.7% annual rate) and coupled with the high debt business and the volatility of Eurozone countries like Greece or Spain, could produce a new stock market crash

This stock would pop beneficial effect of forcing companies to redefine strategies, adjusting structures, restore its finances and restore its credibility in the market (as happened in the stock market crisis of 2000-2002) and as collateral damage the ruin of millions of small investors are still dazzled by the lights of the stratosphere, the financial starvation of the firms and the consequent ripple effect on the declaration of bankruptcy, frequent outbreaks of labor unrest and increased the unemployment rate to levels not seen since the era of War II combined with dramatic increases global deficit and the Public Debt.