The Stock market 10/8/08

[DavidS]

Dow futures are down 194 points. I can't imagine how bad this day is going to get. Can you say Dow 8900?

Update: The people on CNBC look pasty white and scared.

9:51 a.m. The Dow was down 250 points a few minutes ago and is now UP 160 points. This market is not for the weak at heart.

10:57 a.m. The dow is now down 111.27 points from being up 160 points from being down 250 points. I'm dizzy.

2:30 p.m. The dow is now UP 103.

3:50 p.m. The dow is now DOWN 105. This is getting nasty.

4:19 p.m. The dow has closed down 189.01. Down 2% for the day. I wonder if anyone from FoxNews who has no idea what the hell they're talking about regrets saying "Buy! Buy! Buy!"

 

[NOBama]

If we don't see a pop today (based on Fed rate cut) what do you suspect is going to happen tomorrow when the short-sale ban expires?

If there's an upside, I don't see it. Somebody enlighten me, seriously.

 

[slackjawed]

The upside is that when the markets stabilize we will know the true value instead of the inflated value.

 

[DavidS]

I'm going to say this and it's probably the scariest thing I've ever said.

When Bill Clinton took office the DOW was at 3400.

When Clinton left office, the DOW was at 11,000.

That's nearly a 300% increase. In the entire history of the stock market, that has NEVER happened.

When Reagan took office, the DOW was barely 1000.

When Reagan left office, the DOW was around 2000. So it doubled. The DOW has always increased at least 50% no matter what president we've had. For dow to increase 300%, instead of 100%... it's amazing, but perhpas over inflated.

The DOW should be somewhere in the 6000-7000 right now. We've had years of contractions.

 

[DavidS]

If we don't see a pop today (based on Fed rate cut) what do you suspect is going to happen tomorrow when the short-sale ban expires?

If there's an upside, I don't see it. Somebody enlighten me, seriously.

I think they should continue banning it, but I think we should be somewhere around 7000 when we hit bottom.

 

[DavidS]

By the way, YAHOO refused to be sold to Microsoft earlier this year because they felt $34 per share was too little.

Yahoo is now below $14.50.

 

[AVG-JOE]

You know...

Even if the system grinds to a complete halt, as long as China and Canada don't invade, another system will rise from the ashes - people gotta eat.

If you have stock in worthwhile companies and you aren't going to die in the next 10 years, chances are good that your portfolio will recover.

If you are smart, you'll start stockpiling as much cash as you can to reenforce your positions (in companies you feel are worthwhile) when the bottom hits. The really good news is that you can wait until you're certain the bottom has happened before buying and still be getting back in cheap.

-Joe

 

[DavidS]

You know...

Even if the system grinds to a complete halt, as long as China and Canada don't invade, another system will rise from the ashes - people gotta eat.

If you have stock in worthwhile companies and you aren't going to die in the next 10 years, chances are good that your portfolio will recover.

If you are smart, you'll start stockpiling as much cash as you can to reenforce your positions (in companies you feel are worthwhile) when the bottom hits. The really good news is that you can wait until you're certain the bottom has happened before buying and still be getting back in cheap.

-Joe

Agreed. It's time to get out of the market and let it bottom out.

 

[Mad Scientist]

Agreed. It's time to get out of the market and let it bottom out.

I thought the Bailout (excuse me "Rescue" ) was supposed to stabilize the Market and stop the meltdown?
The two good things I see is the dollar is strengthening and oil prices are coming down. Are they interrelated? I think so.
Cheap oil is good for an economy that runs on it. Manufacturing and transportation costs will come down, the people will have more money to spend and it will all snow ball nicely.

 

[AVG-JOE]

I thought the Bailout (excuse me "Rescue" ) was supposed to stabilize the Market and stop the meltdown?
The two good things I see is the dollar is strengthening and oil prices are coming down. Are they interrelated? I think so.
Cheap oil is good for an economy that runs on it. Manufacturing and transportation costs will come down, the people will have more money to spend and it will all snow ball nicely.

We also thought Saddam had WMD's in his panty drawer...

Fool me once...

-Joe

 

[editec]

One word: TIMING

Some of you predicting a rosey future seem to think you have a crystal ball.

I personally hope you're right, of course.

FYI, it took 27 years for the NYSE to recover from the crash of 1929, though.

I'm thinking that in 2035 the DOW isn't likely to be anything I'll much care about.

 

[Mad Scientist]

One word: TIMING
Some of you predicting a rosey future seem to think you have a crystal ball.
I personally hope you're right, of course.
FYI, it took 27 years for the NYSE to recover from the crash of 1929, though.
I'm thinking that in 2035 the DOW isn't likely to be anything I'll much care about.

This is 2008 not 1929, Americas economy is much different today. I read an article today about why America is well poised to come out of this downturn:

AFP: US well-placed to rebound from financial crisis: WEF

The WEF, which hosts the annual Davos pow-wow of business and political leaders, ranked the United States number one in its annual competitiveness survey despite the financial turmoil which has seen Wall Street titans humbled and the taxpayer bailing out banks to the tune of 700 billion dollars.
"Despite the financial crisis, the United States continues to be the most competitive economy in the world," the WEF said in its report.
"This is because it is endowed with many structural features that make its economy extremely productive and place it on a strong footing to ride out business cycle shifts and economic shocks," it said.
WEF economist Thierry Geiger said that the country excels in its "capacity to innovate, the quality of its institutions, the efficiency of government in relation to expenditure, the independence of the judiciary, low levels of corruption and the flexibility of the goods and labour markets."
"The United States is well placed to bounce back from the crisis," Geiger told AFP.

I know this doesn't jibe with the "Sky is Falling" crowd but they got us the huge federal bailout that seems to have not affected the markets much if at all.

 

[HumptyDumpty]

The Anatomy of a Bubble

Until recently, most people had never even heard of derivatives; but in terms of money traded, these investments represent the biggest financial market in the world. Derivatives are financial instruments that have no intrinsic value but derive their value from something else. Basically, they are just bets. You can “hedge your bet” that something you own will go up by placing a side bet that it will go down. “Hedge funds” hedge bets in the derivatives market. Bets can be placed on anything, from the price of tea in China to the movements of specific markets.

“The point everyone misses,” wrote economist Robert Chapman a decade ago, “is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking. Derivatives create nothing.”1 They not only create nothing, but they serve to enrich non-producers at the expense of the people who do create real goods and services. In congressional hearings in the early 1990s, derivatives trading was challenged as being an illegal form of gambling. But the practice was legitimized by Fed Chairman Alan Greenspan, who not only lent legal and regulatory support to the trade but actively promoted derivatives as a way to improve “risk management.” Partly, this was to boost the flagging profits of the banks; and at the larger banks and dealers, it worked. But the cost was an increase in risk to the financial system as a whole.2

Since then, derivative trades have grown exponentially, until now they are larger than the entire global economy. The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars.3 How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want. They can bet money they don’t have, and that is where the huge increase in risk comes in. Article @ Web of Debt [google "it's the derivatives stupid"]

 

[editec]

I am still trying to figure out why the American people should be on the hook for any naked dereivitives.

Now it is legitimate (I suppose) for someone holding bond risk to insure against it.

But these so called naked derivitives that have nothing to do with the risk holders, and are merely bets between otherwise univolved parties regarding the outcome of a bond?

The bankers who took stockholders money and bet into that game?

They truly ought to be shot, folks.

These are truly the pirates of honest capitalism.

Even the Master Class must see how destructive that is..especially to THEM.

Unless, of course, the Pirates are, and have been, at the helm of the MASTER CLASS all along.

If the MASTER CLASS is still even marginally on the up and up, (and I think it is) then somebody has got to walk the plank.

Probably a whole lot of somebodies, actually.

 

[HumptyDumpty]

I am still trying to figure out why the American people should be on the hook for any naked dereivitives.

Now it is legitimate (I suppose) for someone holding bond risk to insure against it.

But these so called naked derivitives that have nothing to do with the risk holders, and are merely bets between otherwise univolved parties regarding the outcome of a bond?

The bankers who took stockholders money and bet into that game?

They truly ought to be shot, folks.

These are truly the pirates of honest capitalism.

Even the Master Class must see how destructive that is..especially to THEM.

Unless, of course, the Pirates are, and have been, at the helm of the MASTER CLASS all along.

If the MASTER CLASS is still even marginally on the up and up, (and I think it is) then somebody has got to walk the plank.

Probably a whole lot of somebodies, actually.

I lean toward the conspiratorial view of history believing this was a planned implosion. Here's a thought: How about the Federal Reserve bail out all these criminal banks with the trillions in prophets they have plundered over the past 95 years. On the other hand we should print 850 billion dollars of imaginary cash to bail them out? I thought that is what caused the bubble to begin with. SEIZE THEM!!

 

[Yurt]

By the way, YAHOO refused to be sold to Microsoft earlier this year because they felt $34 per share was too little.

Yahoo is now below $14.50.

exactly

 

[Yurt]

I lean toward the conspiratorial view of history believing this was a planned implosion. Here's a thought: How about the Federal Reserve bail out all these criminal banks with the trillions in prophets they have plundered over the past 95 years. On the other hand we should print 850 billion dollars of imaginary cash to bail them out? I thought that is what caused the bubble to begin with. SEIZE THEM!!

problem with conspiracy is that lehman and bear stearns have falled under the sword