Tuesday, March 14, 2006

Gravity's Rainbow

What goes up, Isaac Newton might have remarked, must come down. Particularly if it's driven by rampant, hype-fueled exuberance completely unsupported by the fundamentals.


The Saudi stock market has dropped what looks to be about a quarter of its value. Naive speculators have been suffering heart attacks at the prospect of losing their dishdashes.

In Kuwait, the market also seems to have dropped by 25%. Disgruntled traders, evidently annoyed that taking risks is not entirely risk-free, have been protesting the fall in stock prices. The Kuwaiti government, ever helpful, has bowed to popular pressure and plans to swoop in and save them from their own stupidity by injecting money into the market.

The correction to Dubai's stock market is even more severe: the index has dropped down almost to where it was a eyar ago, before all the excitement really got going - almost a 50% loss in value. Amusingly, analysts are suggesting that over-confidence was actually the trigger: investors were divesting in preparation for yet another bout of over-subscribed IPOs.

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