The foreign markets were off about 3% to 4% on Monday, and as of now, 7:00 PM (EST) Monday, the Dow futures are off about 450 to 480 points, an unusually high number, suggesting an ugly opening for the market tomorrow.
If that does, in fact, occur, perhaps this will be the classic blowout that a lot of investors have been waiting for.
In that event the most likely scenario, from a historical standpoint, would be that the early bloodbath would be followed by a stampede of bargain hunters bringing the indices back up somewhat from their low spikes before the end of the session. This could be followed by a general uptrend.
The market activity is still the side show here, at least so far. The main player on the stage is the economy itself, and unless the economy provides a stunning turnaround, we will likely remain - after all the downs and ups - in a bear market.
Incidentally, the futures are not a great predictor of how the market ends up the next day, but they have been good indications of how the market will open.
Also, there have been notable exceptions where the bargain hunters have failed to materialize and trading has had to be suspended.
So, hold onto your hats and get ready for a ride.
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Comments: 90
The people who are going to get really hammered are those who chose to have the bulk of their income paid in company stock. Anyone who employs a financial specialist should look at hedging their portfolios now. Better late than never.
mark my words.
Please do not attempt to delude yourself into thinking this 'package'[ is going to save anything from the viewpoint of continuing foreclosures and closing of businesses that will be affected by this 'oversight.'
We have only begun to see the full impact of this mega drop in values in residential real estate. Most of the foreclosures have not occured, yet. When the five and seven year arms hit thier period of adjustment the country will be aghast at the magnitude of what is yet to come. I wrote an artilcle on this a few short months ago, and most of the comments were ones of denial. Well, it has only just begun.
The best advise is stay out of debt and tighten your belts for the ride.
Things not looking too rosy under conservative leadership, as usual. Yet the myth of conservatives being good with money and for the economy will live on despite evidence to the contrary.
The problem is that this so-called stimulus package does absolutely nothing to address the underlying problems that are causing the economy to decline. If you don't solve, or at least address, the underlying problems, then anything else is simply window dressing and foreign investors are aware of that.
You're right. It will be a really interesting day.
this is all the more reason why putting a program of self investment in the stock exchange as part of the Social Security program would be a total wipe out for the average investor who cannot afford to have someone manage their savings....it to me is capitalism at its worst....
The next few months are going to be very hurtful for the average investor...and the real tragedy as I see it, is Bush putting money out to the American public...that is only the ones who paid taxes...800 for singles and 1600 for couples...is just another wake up call that this man and his administration do not have a clue as to what they are doing...especially when it comes to the economy...and the news reported that last time he did this to stimulate spending was a big disappointment because most folks put the money in their savings...and it did nothing to stimulate business...if it did not work the first time, why would he try and push it thru again....???
I feel that I'm sdmewhat familiar with the situation here in California..I remember my growing amazement at the shacks that were being evaluated for $500,000 mortgages...
I remember inspecting many closing statements that were loaded with more fees than I had ever imagined could exist...
and I remember becoming familiar, through interviews, with the scope of one lender's operations - namely - Ameriquest, and being further amazed at how it cultivated the geographical areas where the least knowledgeable people lived, such as the high desert and the inner city of Los Angeles.
Some say that the people now strugglig with their mortgage terms and the many who are yet to struggle, deserve what they have for not being aware of what they were getting into. It is clear to me, on the basis of my research over the last few years that the "agents," who worked on commission, deliberately misconstrued the terms and that the borrowers were misled.
To answer your question, Patrick, from what I observed, I believe most of the accelerations in the interest rates have yet to be felt, but will be over the next year or year and a half. The borrowers, of course, were qualified on the basis of the initial rates. That means they could afford those rates, based on the income information provided but not confirmed, but not necessarily any higher rates. Anyone and everyone on the inside, all of whom were making tons of money, knew from the start that it was a disaster waiting to happen.
The short answer is that the worst, much worse worst, is yet to come. To put it into dollars is difficult. One aspect I didn't initially anticipate, is that the problem has cascaded beyond the sub-prime category. Apparently the shoddy underwriting is affecting higher levels of credit as well.
This has already caused the beginning of a major liquidity crisis in the financial sector, as you know, and it comes as the country is slipping into a recession, so the combination of factors suggests a very dangerous scenario.
And, waiting in the wings, are additional economic risks which could compound the troubles. We are looking at a scenario which could induce foreign holders of our national debt to dump their dollar-denominated holdings, thus exacerbating the stagflation aspect of the cycle. Like a wounded animal, we may also be perceived as a more likely victim of a terrorist attack. At the same time, we can only hope that the inflation we now see emerging does not cause interest rates to rise to the levels - say - that existed in the eighties. If so, the interest on our national debt could become even bigger than our military expenditures, and the vicious cycle that we've been warned about could begin.
Sally, above, said that this is not all the fault of the Bush administration and mentioned the Fed's responsibility. Well, she's right and she's wrong. It is largely the fed's fault, but the Fed is part of the Bush administration.
It was not particularly smart of me to have predicted this recession here on Gather about two years ago, as I did. The fact is that in a complete break from precedent, the Fed invoked a tight money policy, at that time, that caused the yield curve to flatten and even invert somewhat, in an environment that showed no sign of inflation or an overheated economy. It was a perfect blueprint for exactly what we are getting into now.
Alan Greenspan's obsessive fear of inflation is the root cause of our likely recession. Undoubtedly, he had reason to be concerned. Perhaps it was the size of our debt. Perhaps he saw the world running low on certain commodities. But, whatever, his reaction has put us where we are today. The situation suggest to me that at some point we began to lose control.
And, Greenspan's policies which caused the interest rates to fall to 40-year lows, thus triggering an orgy of mortgage borrowing - together with the benign neglect that the government paid to the situation - are the reasons for the real estate collapse and the liquidity crisis.
In terms of bailing us out, the $70 billion that Hillary is proposing and the $150 billion that Bush is proposing are all well and good, but any measures taken will have a seriously delayed effect on the economy (generally thought to be 18 months to two years), if any effect at all.
It now appears that the government's myopic concern with the war on terror and its neglect of domestic concerns is beginning to take its toll.
Why should countries that produce nothing, and do nothing, and do not even appreciate their people be allowed to gain so much wealth as to strangle the world?
It may be a very good thing that we have troops in Iraq right now.
Of course anyone aware of my opinions knows I've been talking about how detrimental Bush's tax cuts and subsequent budget deficits have and will continue to be to our economy. The root cause of this financial disaster is the unbearable stress on the lending entities because so much of the available funds are tied up in loans held by Our Federal Government. I keep hearing from the Republicans that because of the tax cuts revenues are up. But still we have this record debt. And by the way folks it's called debt not a deficit. Calling it a deficit sounds like the gas tank is down a quarter tank. No folks this si debt, borrowed money, which is more like, the tanks empty and we owe the gas station. And the only long term answer is to pay off the debt as fast as we can. And if that means raising taxes, well I guess we'll all have to make sacrifices to save our country.
Still, it's going to be great fun to watch from my perspective. Maybe after Thursday or Friday Bush will see this as more than a little dark cloud on an otherwise unaffected horizon as he personified it recently. Can you imagine how shocked he would be if somehow he miraculously could understand what life is like out here for those of us who are not CEOs of major corporations?
Your question regarding the future is a good one - and a tough one. Europe is also experiencing a liquidity crisis as indicated by the recent fact that the Fed pumped billions into one or more central banks over there.
Nevertheless, in the near term, the dollar may fall further but, beyond that, it's difficult to project anything with any degree of certainty right now.
Given you knowledge of the European community, I'd be interested in your outlook.
Crystal, you're welcome to read my article of 12/19/07 entitled "The President Saw Clouds."
Fear of the Future now??? Wow......
Closing in on 3:00 AM (EDT) the DOW futures are down 640 points. Further a large volume of money is flowing towards the safety of the government bond market. The 10-year T-bonds are down 15 basis points.
I think, unless the situation changes over the next few hours, it is reasonable to speculate that the opening of the NYSE may be delayed.
The recent situation in California was akin to a pyramid sxheme. Many buyers were just "flipping," and those that got caught holding when the bubble burst are getting hurt...
Incidentally, the India market is being hit particularly hard right now. The nation's finance minister has just released a statement asking investors to "remain calm."
The global situation is very serious...
When you get a government, whose policies openly disdain the concept of "governance" , whose intent is in fact to eliminate ALL regulation, the result is chaos. We saw it in a very real sense during and after hurricane Katrina. We saw it during the rise and fall of ENRON, and now we are seeing the cumulative result of deregulation, combined with greed and incompetence. The republican way. A putrid stew.
The government need not do anything, and some companies need to go broke for their bad management practices.
This too shall pass.
That is the only reason that we are at today. Those were both stupid things to do in my opinion.
The rate cut by the Fed will have a very delayed effect on the economy, if any at all. It was, of course, aimed at the action of the market itself.
The Asian markets were particularly hard hit and it would not be surprising to see a rebound tonight. The bears and the bulls in the U.S. are locked in a battle around the 12,000 level on the DOW which is a major resistance point.
The global volatility does not portend well for a return to a stable environment, looking down the road.
My personal feeling is that Bernanke is a fairly competent Fed chair and is doing okay at preventing a bloodbath. But our economy is not just about one guy, come on! I have not been thrilled by the economic team that Bush has had throughout most of his administration. Paulson is okay. Bush, on the other hand, well, I just have my doubts about how well he understands this stuff and how much leadership he can exercise. I visualize him saying okay, whatever you guys think is best- and knowing Bush's lack of expertise in the topic that is probably the best approach for him to take.
I do honestly think that after all this negativity there are probably a fair number of blue chip stocks that are oversold and that people should look closely at.
I think we need to ad stability and predictability to the world by becoming more like the rest of the Western nations in sensible regulation and investments in our people and infrastructure. The Western nations also need to become more like us, that is, standing up for democracy and against rogue nations ... I'm ignoring our current administration that may have made that less likely to happen.
The EU altogether has a larger economy that the US now it would behoove all of us to cooperate more, and stop being so complacent.
The biggest players in channeling funds into the sub prime market are now newcomers on the Forbes top 400 list and, of course, all billionaires with no concerns or responsibilities for the mess they've left behind.
Of course the real villain is the government that allowed this unethical amassing of fortunes without any regulation whatsoever.
Promote capitalism, government regulation of capitalism, and the progressive income tax.
Even I am getting sick of it.
There is a theory going around that we are set for a major depression, similar to the Great Depression. The theory goes like this:
Four parallels: 1. Stiff job competition;
2. Surge in immigration - the 90s to now have been the greatest rise in immigration since the 19teens to 1920s.
3: Rise in Eugenics - similar to the rise of Nazism, the Eugenics movement is both limiting immigration and displays a hatred of Arabs. (Not me, I'm just saying that this kind of thinking is a parallel. And I'm not the first to think this.
4: Buying stocks on margin and overusing credit.
Not sure that I buy the theory that we are hading toward a major major deprression; I think it is more realistic that because all of these 4 parallels have been going on for awhile, that we will continue to have periodic recessions.
The Fed needs to continue to lower the interest rate.
What happens if the foreign investors start cashing in their stockpiles of American dollars? That's a legitimate question because I really have no idea.
It will be interesting to watch until the end of the week.
I have begun stock piling my supply of Dramamine.
All I can do is sit and watch the headless chickens run around... no investments, no extra ca$h, just hobbling along paycheck to paycheck...
I agree that we will probably not have another one in the near future, although the likely recession that seems to be bearing down on us could be anything but typical.
However, back on 6/11/06 I posted an article here on Gather titled "Then & Now," that happened to mention a few additional similarities, namely:
- INCOME INEQUALITY - The Brookings Institute published a study in 1929 showing that the top 1% reported a combined income equal to the bottom 42%. It called the growing gap an imbalance in the economy. Recently. Time Magazine reported that while the wealthiest Americans have seen their income increase by over 400% since 1980, the vast majority have barely kept pace with the cost of living.
- TAX BREAK FOR THE WEALTHY - Coolidge's Revenue Act of 1926 provided a tax break heavily weighted towards the rich. As a result, those making $1 million per year, for example, received a 67% cut. Of course we're quite familiar with the Bush tax cuts that started in '03 that also favored the rich.
- EXPLODING PERSONAL DEBT - Installment credit more than doubled between 1925 and 1929, prompting the descriptive phrase "Telescoping the future into the present." That same phrase could well be applied to the orgy of mortgage borrowing of the past few years made possible by the low interest rates that effectively qualified borrowers, many of whom would have become qualified in due course over the next few years as their incomes increased.
However, there is one big difference - so far - between then and now. A number of years ago I took a little time to read the N.Y. Times for the period leading up to the Great depression, and I noticed that the most notable global economic event during the two years before 1929 was a general drop in prices. That is the measure of a true period of deflation and, as indicated, we haven't seen that yet.
The only parallel I can see with WWII is the degrading and
disempowering of the average citizen. People get so put
down and desperate that they cannot help but allow their
brains to move into absurd terroritory and rationalize actions
if they subconsciously believe strong enough that it will help
them survive, like being a Nazi in Pre-war Germany.
After the war (WWII) all the mistaken idiots who brought
ruin on their country and the world were disempowered or
dead - certainly in disgrace. The average people had a
chance to rise, and a reason to to it. We still see it today
somewhat in European activism.
Sadly, America, does not have such a democratic movement.
We have only had such a thing with race and religion, so
we have been able to ignore, villify or demean the push for
change as xenophobic and not a universal moral imperative
as it should be. Maybe this is why the tax argument or any
economic loss seems to be mean so much to some Americans.
In our American unconsciousness we have forgotten about
moral hygeine and pruning the tree of freedom, and we
have let an elite develop that whatever they may think,
the operative problem is that think their arrogant right as
it a rich "white" usually American, trumps democracy, and
in fact they have undermined democracy's infrastructure
to more fully support their ascendence to power.
As far as the stock market, I am dollar cost averaging
into it over the next year because I think it will drop and
them go back up just like it did every other time people
get flustered.
The mistake people make is to think this is based on
anything solid or real or even quantifiable, it is political,
nothing but our feelings, and our power. The market
ought to be going up, and I would bet on Jan. 20th of
next year or shortly thereafter we will reach a new
high ... if I did bet.
Two years is a very short time. However, when the year 2010 starts and we look back, I think that the world will have learned a lesson two about the world's economy.
What's good for China is also good for Pakistan, and what's good for Iran is also good for the US.
There is only one world and we all live in it.
I am scratching my head, though, wondering that no one has mentioned the effect of lost labor jobs to foreign shores and the increase in investing American dollars in overseas markets.
The financial meltdowns fostered by sub-prime lending are certainly a part of our economic problems, but what about folks who have lost their jobs or had their salaries cut by their employers? This also creates devastating effects on the economy, the ability to invest and pay bills, the price of shares in companies that are re-sizing and the ability of middle and low income individuals to create business start-ups.
Every dollar that leaves our shores is money not stimulating our economy. If my knowledge is even close to correct, this totals billions of American dollars tied up in economies other than our own.
I found it to be totally distasteful years ago when Al Gore, as V.P., stood in China and proudly announced a new GM assembly plant. The extent of the agreements between various American companies and China for operations in China was at one time known, but I haven't seen a total lately. And now India.
In the past few months Pfizer has announced that it will transfer its extensive research operations to India and Ford has announced a new plant there. Despite the poverty there, India has such a large population that there are more people there that can afford a new car than here in the U.S.
NAFTA and the World Trade Agreements were strictly for the benefit of big business (instead of the term "Free Trade" it should have more accurately been called "Free Manufacture.")
The fact that it served to further subjugate the American worker was just frosting on the cake for our beloved capitalists.
Don't get me started....oops, you just did...
D.......................................
That's the sell low, buy high strategy is it?
Truer words were never spoken.
Our shipping ports are in grid lock for sending jobs overseas, and receiving foreign-made products back here for US (pardon the pun) to purchase. Problem: the folks that need the products have no jobs. Those unemployed could probably take a menial job in an attempt to feed their families. But wait! There are no menial jobs available ~ they've already been filled by illegal immigrants! (Who, by the way, pay no taxes but send their American born kids to our schools, drive on our streets, receive public assistance and protest for "rights" they don't have to begin with.)
Oh, Dave, don't get me started.
I'm on my way over to your house to get some of whatever it is your drinking that make you think this is so terribly funny. I need to be ROTFLMAO also!