Last week's drop in U.S. stock was caused by "concerns about sub-prime lenders." At least that's how the financial media spun it. Post quod, ergo propter ho, the old Romans used to call this kind of explanation. "After, thus because of."

The causality implied, however, makes little sense. After all, sub-prime lenders have been in the press since February. "Concerns" were voiced and acted upon for months... particularly during the previous week, when the Dow set new all-time highs.

Yes, indeed, sub-prime lenders are going out of business. Borrowers -- especially amateur real estate investors who got in late in the game -- are foreclosing on properties. And some hedge funds that had loaded up on the parsed-out mortgage debt are losing some of the money their fat-cat investors had pushed at them.

No doubt, the real estate crunch is also putting a dent into the balance sheets of U.S. banks -- especially those who have restricted themselves to conduct their business domestically only... and build up large, risk-embracing low-end consumer mortgage divisions in the past four years.

The banking business is a global one. Among the bank stocks listed on the German DAX, for example, not a single one was trading in the black figures by early afternoon European time.

But big, international financial institutions are more than able to make up for lending losses by their swollen balance sheets from the equities and investment banking business. And the mortgage crunch also may exist more in the minds of socially aware editorial writers than in reality. Mortgage rates are still near historic lows. So are incomes and employment. In fact, a recent study still put unemployment and divorce as the major triggers of foreclosure -- not systemic inability to pay mortgages.

My view is that last week's dip in the Dow was a temporary technical correction that had very little to do with the U.S. real estate and mortgage markets... whose fallout, after all, has been priced into the market since January.

Still, I consider it a long-term warning signal. If U.S. lenders threw caution to the wind in the last years of the real estate boom, just wait for Chinese banks to start leaking bad news regarding worse loans about 14 months from now... when the bills for the Beijing Olympics come in and the bloom is off the Chinese real estate hyper market.

Until then, however, make good news of the opportunities stock markets around the globe are offering you. (If you need ideas, check out our daily coverage at http://www.taipanfinancialnews.com. My TFN favorite segment, by the way, was “Solar Energy Power Plays”.

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