Fear Rules The Day
Stocks fell like a hammer blow as US stocks followed the rest of the world stock markets down. Confidence has not increased since Congress passed the bailout – I guess there must be more to bail out.
Bonds were the “safe haven.” All international monies moved to the US and bought bonds – forcing the Dollar higher and bonds below 3.5%. This looks like the FED must reduce rates in the near term.
Oil and gasoline continued their downtrend below $90 as all markets think the world is going into a recession – therefore will use less energy.
Gold surged up today on all the fears around, and remains a reasonable buy at its current level.
In the news today….
It’s all about the markets. So, when Congress DIDN’T pass the $700B legislation, stocks fell 777 points. Today, the first day after Congress DID pass the $850B legislation, stocks fell 370, but was down almost 800 points at one time. Do you remember that some Congressmen/women were intimidated by the original 777 point fall, and the public started calling them worried about their 401K’s, and pensions? That 777 point drop convinced some lawmakers to pass the next bill. However, the market has no emotions or loyalty – it only represents the fear and greed of all the people owning stocks. Not a pretty picture right now for all those 401Ks and Pensions.
We haven’t heard about any pensions failing yet, but we will in the next year.
Dinner Conversation Tonight
Let’s talk about Wachovia – right now we have a right between Citigroup and Wells Fargo – both trying to buy the Wachovia assets. The FED is now stepping into the middle of the fight – and will probably direct that some of the assets go to Citigroup.
Why would the FED favor Citigroup – even if it costs taxpayers more money this way???
Could it be that Citigroup actually NEEDS the assets of Wachovia to stay afloat?
Here are Today’s numbers:
Dow Jones 30 Industrial - 9956 (down 370 points)
10 Year Treasury Bond - 3.42% (down 0.22%)
Euro - $1.3511
Gold - $866 (up $33)
Oil - $87.81 (down $6.07)
Gasoline - $2.06 (down $0.17)
Yes, I think Citibank needs the assets. Well, in the sense that they need the branches in the locations they don’t already have plus the deposits. Of course they DON’T need the existing mortgage book.
Surprisingly the Nikkei is only down about 1% at the moment after dipping below 10000 for the first time in years.
My question to you all is this:
If after the Japanese bubble burst in 1989, their stock market fell around 80%. What makes us think our markets are any different?
David,
Great question. The Dow fell 80% during the crash of ‘29 too. If this is going to be a real crash, there is nothing stopping our economy from returning to those days. Only time will tell.
Here is a question to ponder. Why has the Japanese stock market been so stable - given all the other markets crashing around the world? And, (HINT), why is the Japanese Yen the only currency going up in the world against the Dollar?
Tom
I’ll make a bold prediction; the US markets will decline by 60% to 80%.
And no, the world economy hasn’t decoupled so that goes from most major markets as well.