How much time do you spend trying to find a way how not to answer the real intention of a post when it rocks your image of the R party?
A 300-point drop? It's just the start
With the credit markets a disaster, buyouts can't continue to drive stock prices higher. That's one reason, of many, I think we're headed for an even bigger fall.
Latest Market Update
July 27, 2007 -- 10:00 ET
[BRIEFING.COM] Equities are still on the defensive, but barely, as a renewed wave of buying interest lifts the indices well off their recent lows. Turnarounds in the Financial and Technology sectors have been the most notable areas of improvement.
For a change, this week I'm going to delve into stock-market machinations (both on the surface and behind the scenes) because I think they suggest we have reached a critical stage in the credit-unwinding process. My focus will be on Thursday's action.
Black cat crosses bulls' path
Before the open, stock-index futures were down about 1%-plus. Why was that important? Because in the last year or so, when we have seen an ugly session (like the one Tuesday), it's typically prompted an immediate rally -- if not the following day, then the day after that.
However, Wednesday's rally was pretty punk. Which is why I (and the bulls) thought there'd be another attempt the next day. The fact that the futures fell out of bed pre-opening was thus an indication that something was potentially very different.
As I checked all of my contacts in credit land, it quickly became clear to me that this was the source of the problem. One friend who watches the high-yield market said: "Credit is an unmitigated disaster this morning. Bonds down 2% to 3% across the board." In addition, the "Lord of the Dark Matter" confirmed that structured credit was really getting thumped, ditto all the leveraged indexes and the ABX credit stack. To quote him: "Mate, there is a massive margin call in structured credit and there are no marginal buyers for it."
Truthmatters said:How much time do you spend trying to find a way how not to answer the real intention of a post when it rocks your image of the R party?
They ignored it because it was keeping Bushs numbers up.
This isn't really an indictment of the republican party; the coming economic troubles are an indictment of bad federal reserve policy, which is independent of party.