A Week When Risk Came Home to Roost

Published: August 12, 2007, 7:07 pm

Tags: fair game, morgenson gretchen, times select

By GRETCHEN MORGENSON Published: August 12, 2007 FOR something that everybody assured us was contained, the subprime mortgage mess certainly has spread.Last week, the hemorrhaging credit markets bled right into the stock market. The major indexes are still up for the year, thankfully, but the Dow Jones industrial average, which hit 14,000 just three weeks ago, has lost 5.4 percent of its value since then. And the Standard & Poor's 500-stock index is down 6.4 percent from its July peak.Why are the bond market's troubles something for stock investors to worry about? The easy answer is that all markets, both here and around the globe, are intertwined. And despite Wall Street's insistence that diversification and therefore safety could be found in different types of assets, investors are again learning that diverse holdings often behave similarly. This is especially true in periods of uncertainty like the one we are enduring now. But there are other

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