KEY POINTS:
It would be wrong to describe the US market meltdown as a crash. It is serious and it is destroying wealth but it is just too darn slow to qualify as a crash. In motoring terms it is more akin to leaving the handbrake off.
We get to
look on - horrified yet riveted - as the US stock market rolls gently downhill towards an undetermined fate.
Adding to the drama there's a bloke by the name of Ben Bernanke - let's call him a friendly neighbour - who is close enough to the action to try to halt the car's momentum.
But the US Federal Reserve Governor is a little bloke and the US drives the SUV of world stock markets.
Every time Bernanke throws his shoulder into it, the car looks like it might slow down - but it doesn't. It just starts rolling again.
It would all be quite comical if we didn't have the New Zealand economy parked at the bottom of the hill. And as economies go New Zealand drives a Corolla (pretty reliable but lightweight).
Will we get dinged, crunched or written off? Everyone seemed to have an opinion this week as the US drama finally spilled over into mainstream consciousness courtesy of investment bank Bear Stearns.
The Federal Reserve cut interest rates by a whopping 0.75 per cent on Tuesday to take the US rate down to 2.25 per cent. That sparked one of the biggest single-day rallies that Wall St has had for years. But the very next day stocks were falling again.
The US$200 billion ($252 billion) of cheap loans announced by the Fed earlier this month had a similar effect - delaying the sell-off for all of a day and a half.
In New Zealand seasoned brokers remain philosophical. Nobody is enjoying this, but there is little we can do but sit back and watch it run its course.
Unlike 1987, the local companies worst affected by the credit crunch aren't listed companies. While we've seen collapses in the property and lower tiers of the finance sector, our top stocks aren't highly geared and have strong revenue streams. Most of them make or sell tangible things - buildings, electricity, phone calls and fridges.
It's tempting to be cynical about brokers saying don't panic. After all they have a vested interest. But if they seem calm it might be because they are sitting on an enormous buffer of growth over the past seven years. The NZX-50 rose 157 per cent between January 2001 and October 2007. It has shed 20 per cent in the past five months, taking us into dreaded bear market territory.
But put that in perspective. The Dow Jones index shed 22 per cent in one day on October 19, 1987.
Bernanke's efforts this year might not ultimately prevent a US recession but they have slowed the stock market correction enough that there is plenty of opportunity for people to think about their positions and act rationally about what's best for them right now. The big question probably for most people is: Do I need cash?
Those that aren't strapped for cash can avoid realising any losses by simply not selling. Those that have cash might actually be ready to go bargain hunting. Briscoe's Rod Duke offered a good example of the opportunities out there when he snapped up almost 4 per cent of Pumpkin Patch at a bargain basement price on Wednesday.
A pessimist might say that Pumpkin Patch faces big challenges as US consumers stop spending. But Duke is clearly no pessimist. He'll be picking that Pumpkin Patch is in good shape to ride out a global downturn and will eventually get back on to its growth path. Optimism is an innate human quality. It's also often a characteristic of the world's most successful investors.
The likes of Graeme Hart and Richard Branson don't look the kind of blokes that spend a lot of time fearing the worst.
Liam Dann is Herald business editor
