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There is a big potential for an extremely serious meltdown this week - Lehman looks to be going under, and several other big names are suddenly looking extremely vulnerable. This is what the Fed tried to prevent with Bear Stearns back in March (remember the bounce when that happened?) - but in the reverse (so does the bounce go in the other direction?), and it looks like this time its actually going to happen. Once the process starts there is the potential for some very serious chaos and damage and who knows who or what will be left standing when the dust clears.
This is as close to "worst-case scenario" as we may be likely to get in our trading lifetimes.
Be prepared. Be vigilant,. Keep things on a very short leash.
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I have just noticed futures just dropped over 270 points in DOW, 40 points in NASQDAQ and 35 points in the S&P 500. While my trading career has been short, this is the first time I have seen as steep as a drop as this. At the same time, I have never seen futures pop up such as it did when Fannie and Freddie was taken over. These days sure bring some interesting scenarios to the market.
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Registered User
Joined: 3/16/2006
Posts: 2,214
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E-MINI S&P 500 |
Sep ’08 |
18:47:29 EDT |
1,220.50 |
-36.75 |
1,230.25 |
1,231.75 |
1,211.00 |
| MINI DOW JONES INDUS.-$5 |
Sep ’08 |
18:47:24 EDT |
11,179.00 |
-279.00 |
11,350.00 |
11,350.00 |
11,104.00 |
just horrible! Sig
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thank God I've been in money markets since 3/25/08 from my 403b @ my work place!
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Posts: 1,506
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There's a guy who does a commentary over at Kitco by the name of Jim Willie ...
He published an article last week ... explaining the recent dollar rally ... and although I can't say that I have a full understanding of the mechanics ... was quite interesting ...
www dot kitco dot com/ind/willie/sep112008.html
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Posts: 3
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Thanks for news. Along the same lines, I wonder if anyone could comment on the following question (I"m new, and if this is not an appropriate question let me know): why is it that when the hint of bailout of FRE/FNM came out in July or so, their stocks spiked way up? But in the last few weeks talk of a bailout was accompanied by warnings that their common stock would get not help - and so it wasn't surprising that they have collapsed. Is it just a matter of new and better information replacing some original over-optimism that a 'rescue' might actually help their stock?
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Posts: 393
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Intresting discussion on CNBC concerning MER/BAC,LEH, AIG.
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Posts: 6,049
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"This is as close to "worst-case scenario" as we may be likely to get in our trading lifetimes."
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Lets hope not. I've already been thru the crash of 87.
Kind of interesting to note. In spite of the flood of tears. The "bear"
is only where it was in early 2001.
We could go down to 800 on the SP-500 over the next few years and
only have the "last bear market".
(unless we get there tomorrow)
Thanks
diceman
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QUOTE (diceman)
"This is as close to "worst-case scenario" as we may be likely to get in our trading lifetimes."
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Lets hope not. I've already been thru the crash of 87.
Kind of interesting to note. In spite of the flood of tears. The "bear"
is only where it was in early 2001.
We could go down to 800 on the SP-500 over the next few years and
only have the "last bear market".
(unless we get there tomorrow)
Thanks
diceman
Well ... history shows us that these are generally about 3 year (33 month) events ...
It also shows us that the drawdown from peak to trough seen in the first year ... is somewhere between one third to one half of the total drawdown ...
And lastly ... that the third year is generally the worst ...
To my knowledge ... the worst market year on record was 1932 ... when the DJIA lost 51% of it's value ...
An although I too lived through 1987 ... and it was quite exciting ... I don't consider it a "real" bear market ... as it lost barely more than what it had gained in the previous year ... and recovered a great deal of it in the following 6 months ...
I regard 1987 as a market "shock" ... rather than a change in trend ... which is how I personally define bear markets ... when the market bottom is found within a few weeks of the top ... I just don't see that as a bear market ...
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Joined: 12/31/2005
Posts: 266
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QUOTE (diceman)
Kind of interesting to note. In spite of the flood of tears. The "bear"
is only where it was in early 2001.
We could go down to 800 on the SP-500 over the next few years and
only have the "last bear market".
(unless we get there tomorrow)
Thanks
diceman
comforting news to investors, that after riding the roller coaster market for 10 years, the market may only be off its high by 45%. lol
provided they were invested in the sp-500 and not the nasdaq.
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Registered User
Joined: 12/31/2005
Posts: 266
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QUOTE (diceman)
Kind of interesting to note. In spite of the flood of tears. The "bear"
is only where it was in early 2001.
We could go down to 800 on the SP-500 over the next few years and
only have the "last bear market".
(unless we get there tomorrow)
Thanks
diceman
comforting news to investors, that after riding the roller coaster market for 10 years, the market may only be off its high by 45%. lol
provided they were invested in the sp-500 and not the nasdaq.
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"comforting news to investors, that after riding the roller coaster market for 10 years, the market may only be off its high by 45%. lol
provided they were invested in the sp-500 and not the nasdaq."
Well you could be in Japan.
I guess 1982 to 2000 is supposed to go on forever. LOL
That's why they invented diversification.
Fortunately I got over the SP-500 thing a long time ago.
Thanks
diceman
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"To my knowledge ... the worst market year on record was 1932 ... when the DJIA lost 51% of it's value ..."
Maybe its just my imagination but seems like there's an awful lot of
whining, crying and tears for where we are in the scheme of things.
I don't even remember people being mad at the bottom of the last
bear.
Maybe because this one has a group of players that one can point
the finger at in anger?
(who they never liked to begin with)
While the last bear "just happened".
Thanks
diceman
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Joined: 12/31/2005
Posts: 266
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QUOTE (diceman)
"comforting news to investors, that after riding the roller coaster market for 10 years, the market may only be off its high by 45%. lol
provided they were invested in the sp-500 and not the nasdaq."
Well you could be in Japan.
I guess 1982 to 2000 is supposed to go on forever. LOL
That's why they invented diversification.
Fortunately I got over the SP-500 thing a long time ago.
Thanks
diceman
the sp-500 is actually quite diversified.
but i suppose your talking about that "old school" forgotten divesification,(stocks, bonds, cash, real estate, and hard assets).
the last bear market, the 90% decline in the nasdaq, saw a lot of retirement mone go to heaven, i can remember in the 90's everyone at work talking constantly about the nasdaq, then after the bear in 2000-02, few cared to discuss the nasdaq anymore. most had their trading accounts wiped out.
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Posts: 1,506
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QUOTE (diceman)
"To my knowledge ... the worst market year on record was 1932 ... when the DJIA lost 51% of it's value ..."
Maybe its just my imagination but seems like there's an awful lot of
whining, crying and tears for where we are in the scheme of things.
I don't even remember people being mad at the bottom of the last
bear.
Maybe because this one has a group of players that one can point
the finger at in anger?
(who they never liked to begin with)
While the last bear "just happened".
Thanks
diceman
First ... I made a mistake on that year ... it was 1931 ... the market bottomed in the summer of 1932 ... I believe ...
Yes ... much more whining ...
But ... remember ... much of the fall in the 2000 bear occured after ... and was attributed to ... the terrorist attacks of 9/11/2001 ...
The "terrorists" this time were bankers ....
And they delivered a much deeper wound ...
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"The "terrorists" this time were bankers ...."
--------------------------------------------------------------------
I've seen the enemy. It is us.
(we just want to blame the bankers)
Thanks
diceman
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Posts: 902
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QUOTE (diceman)
Maybe its just my imagination but seems like there's an awful lot of
whining, crying and tears for where we are in the scheme of things.
I don't even remember people being mad at the bottom of the last
bear.
Maybe because this one has a group of players that one can point
the finger at in anger?
(who they never liked to begin with)
While the last bear "just happened".
I don't see this as a bull/bear thing - this is something more fundamental - a failure of institutions. The normal market cycles, the bull, the bear, everything that technical analysis is supposed to be a tool to analyze - that all presumes that the "system", and the institutions that are the embodiment of that system, are functioning and working properly. Sure, every once in a great while an institution gets caught in some kind of trouble and maybe goes under, but that is not endemic of systematic failure. That is not "consortiums" needing to get together to take extraordinary measures in order to "maintain confidence" - that smacks of 1929.
The foundations of the financial system appear to be built on the sand on the beach at Gavelston - waiting for the hurricane to come in. We have no idea how bad the damage will be or what will remain standing once it all blows over. That breeds fear. That breeds panic. That's different from "whining and crying" over a bear market.
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Well said hohandy ...
I believe that the simple truth is ... that our financial system has failed ...
And it would be much more obvious at this point if not for the Fed's "masking" it by the use of Term Auction Facility Credit ... and their "Trash for Cash" program ...
The latter of which they just expanded to take equities ... in exchange for Treasuries ...
All we really need now ... is for the foreigners to start dumping our notes ... and our money ...
That ought to just about do it ...
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"That breeds fear. That breeds panic. That's different from "whining and crying" over a bear market."
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Well I think you are making the mistake of thinking the analysis or "whining"
is real.
Remember that whining started during the bull. If one whines and cries long
enough you will eventually be correct.
(I know because I was the defender of the bull)
The real question is when wont they cry?
There is always the type that says: "The bear booh hoo the bear".
Of course as soon as the market rallies they talk of:" irrational
exuberance".
This is just 24/7 whining. Usually this type has other agenda's in play.
At some point you have to pick a team. You have to be consistent.
Thanks
diceman
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QUOTE (diceman)
At some point you have to pick a team. You have to be consistent.
Thanks
diceman
Amen !
If you don't ... you're simply going to be whiplashed all over the place ...
Like most I suppose ... I'm a bull at heart ... but not when the level of leverage becomes rediculous ... or when companies hide their true risk off balance sheet ...
I believe that it is perfectly acceptable to change your position with the changing tides of economic conditions ... however ... to find yourself whipsawing daily, weekly, or even monthly ... just doesn't seem to me like it's going to work ...
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how many more can the fed bail out? don't understand how all these financial institutions could have been walking the unsoluable tightrope. aren't these guys running these institutions supposed to be smart? maybe too smart or too greedy. you think we had too much big government before? this mess just gives them more reason to try to control more.
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Posts: 1,148
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QUOTE (johnlc) how many more can the fed bail out? don't understand how all these financial institutions could have been walking the unsoluable tightrope. aren't these guys running these institutions supposed to be smart? maybe too smart or too greedy. you think we had too much big government before? this mess just gives them more reason to try to control more.
kind of comical listening to cnbc europe calling the united states socialists.
we'll see whether this aig thing goes through. sounds like a lot of congressmen are furious.
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QUOTE (johnlc) how many more can the fed bail out? don't understand how all these financial institutions could have been walking the unsoluable tightrope. aren't these guys running these institutions supposed to be smart? maybe too smart or too greedy. you think we had too much big government before? this mess just gives them more reason to try to control more.
You misunderstand john ...
The "Fed" didn't bail out AIG ...
The US Treasury did ... that is ... YOU & I did ...
We just bought an 80% stake in AIG for an amount roughly equal to .6% of US GDP ... an amount of money that is about 3.5% of the IRS's 2007 revenue ...
And it happened without a single word being said about it on the floor of Congress ...
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QUOTE (realitycheck) QUOTE (johnlc) how many more can the fed bail out? don't understand how all these financial institutions could have been walking the unsoluable tightrope. aren't these guys running these institutions supposed to be smart? maybe too smart or too greedy. you think we had too much big government before? this mess just gives them more reason to try to control more.
You misunderstand john ...
The "Fed" didn't bail out AIG ...
The US Treasury did ... that is ... YOU & I did ...
We just bought an 80% stake in AIG for an amount roughly equal to .6% of US GDP ... an amount of money that is about 3.5% of the IRS's 2007 revenue ...
And it happened without a single word being said about it on the floor of Congress ...
and guess which creditors will be last in line to collect?
bush did a great job of picking paulson.
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FED bails out AIG with $85 Billion loan. Fed takes 80% of AIG as collateral. (news update)
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QUOTE (laphill)
FED bails out AIG with $85 Billion loan. Fed takes 80% of AIG as collateral. (news update)
But ... the Fed didn't have the money for this one ...
Which is why Benanke & Paulson were on Capital Hill @ 6:30 pm last night ...
I'm willing to bet that there are going to be some Congressmen "livid" over what happened last night ... without a single word being said about it on the floor ...
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"And it happened without a single word being said about it on the floor of Congress ..."
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They were consulted years ago. Who do you think got the sub-prime ball
rolling?
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"We just bought an 80% stake in AIG for an amount roughly equal to
.6% of US GDP ..."
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Comforting to know 99.4% will be focused on "sensible", "effective",
spending with the "peoples" interest in mind. (and the "children")
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"there are going to be some Congressmen "livid" over what happened last night .."
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Why? They love spending our money. Oh. Ok. They couldn't use it to buy votes.
Yes that would make them "livid".
Thanks
diceman
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Registered User
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QUOTE (diceman)
Comforting to know 99.4% will be focused on "sensible", "effective",
spending with the "peoples" interest in mind. (and the "children")
Thanks
diceman
Not that right there is FUNNY ...
I don't care who ya are ....
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the sinkage of "THE TITANIC" dj30 @ -250 nice!
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Posts: 902
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QUOTE (signaltap) the sinkage of "THE TITANIC" dj30 @ -250 nice!
SKF is the place to be, baby!
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"I believe that the simple truth is ... that our financial system has failed ..."
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I don't think the financial system has failed.
I think the "lies" have.
General Mills is still gonna make cereal.
Intel is still gonna make semi-conductor chips.
McDonalds is still gonna sell hamburgers.
We've once again proven that caution and
responsibility make some kind of sense.
You cant leverage risk to infinity.
You cant just buy a home because you want one.
Does anyone notice when the things that were eliminated
to allow this were formed? (Glass-Steagall 1933)
What do you think was going on in 1933?
What do you think the mind-set was in 1933?
Probably our biggest problem is its been about
75 years since 1933. How soon we forget.
Thanks
diceman
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Well ...
If we're going to talk about the last big credit crisis ...
Let's look at it "apples for apples" ...
We're not quite one year removed from the market top ...
We're down .... what ? about 25% off the highs ? ... at about this time in 1930 ... the Dow was down about 28% off it's highs ...
So ... what was the mindset in 1930 ?
And did the situation get better ... or worse ?
Don't get me wrong ... I'm not predicting a 90% decline ... only that it takes time for problems to deveolp ... and to subside ...
And they probably still made cereal ... through the whole thing ...
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Posts: 158
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And people who paid 100% cash for stock weren't forced to sell... as long as their bank money was kept in a matress.
If you take a look ... a huge number of three year mortgage loans were sold in late 2004 and 2005 ... that have been adjusted in the past twelve months. Much like the old 7 year baloon mortgages common before 1933.
In 2004-2005, everybody thought Hillary! was going to be the Dem Prez nominee, and be coronated in Jan 2009. Now it's a race, and the moneyed classes of Europe and the Middle East favor Obama, while those of Asia and North America are mixed. But all of us moneyed classes want to make more money, so we'll see. The financial turmoil favors Obama, but only by a little, as he is the devil you don't know, whereas McCain is viewed as the devil you do know. Yes, I do think the stock market is taking a referendum on the election, and it ain't pretty. It's gonna stay interesting for a while.
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QUOTE (diceman)
I don't think the financial system has failed.
I think the "lies" have.
General Mills is still gonna make cereal.
Intel is still gonna make semi-conductor chips.
McDonalds is still gonna sell hamburgers.
I don't think it's as simple as that, though, Diceman. Much of the economy needs easy access to credit and well-functioning credit markets to get by. Sure, McDonald's will still sell hamburgers - but to the extent that their business plan relies upon credit to help them grow and expand, that's not going to happen now. And then to the extent that their (or any) business plan relies upon growth at all to be a necessary component of success, well that suddenly goes into doubt..
The financial system and credit are integral parts of the economy. When they're functioning smoothly, you don't really notice their role and impact on business, growth, and jobs. When they stop functioning smoothly and credit becomes tight, growth grinds to a halt, job-creation stops and the economy starts shrinking, which feeds upon itself in a descending cycle. When they stop functioning at all, panic sets in - that is why several extraordinary measures have had to been taken over the last several months and things are accelerating now.
Read up on how the Depression took hold in early 1930s and the dislocation of the financial system and its effects on the economy suddenly look very similar to what's going on today. White Castle (the McDonald's of the day) still sold hamburgers - but that didn't mean that times were very tough.
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QUOTE (hohandy)
I don't think it's as simple as that, though, Diceman. Much of the economy needs easy access to credit and well-functioning credit markets to get by. Sure, McDonald's will still sell hamburgers - but to the extent that their business plan relies upon credit to help them grow and expand, that's not going to happen now. And then to the extent that their (or any) business plan relies upon growth at all to be a necessary component of success, well that suddenly goes into doubt..
The financial system and credit are integral parts of the economy. When they're functioning smoothly, you don't really notice their role and impact on business, growth, and jobs. When they stop functioning smoothly and credit becomes tight, growth grinds to a halt, job-creation stops and the economy starts shrinking, which feeds upon itself in a descending cycle. When they stop functioning at all, panic sets in - that is why several extraordinary measures have had to been taken over the last several months and things are accelerating now.
Just like "air" & "sex" ...
Not a big deal ... until you ain't getting any ...
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"If we're going to talk about the last big credit crisis ...
Let's look at it "apples for apples" ...
We're not quite one year removed from the market top ...
We're down .... what ? about 25% off the highs ? ...
at about this time in 1930 ... the Dow was dow
about 28% off it's highs ...
So ... what was the mindset in 1930 ?
And did the situation get better ... or worse ?"
-------------------------------------------------------------
"I don't think it's as simple as that, though, Diceman. Much of the
economy needs easy access to credit and well-functioning credit markets to
get by. Sure, McDonald's will still sell hamburgers - but to the extent
that their business plan relies upon credit to help them grow and expand,
that's not going to happen now. And then to the extent that their (or any)
business plan relies upon growth at all to be a necessary component of
success, well that suddenly goes into doubt..The financial system and credit
are integral parts of the economy. When they're functioning smoothly, you
don't really notice their role and impact on business, growth, and jobs.
When they stop functioning smoothly and credit becomes tight, growth grinds
to a halt, job-creation stops and the economy starts shrinking, which feeds
upon itself in a descending cycle."
--------------------------------------------------------------------------------------------
Hohandy, Reality
I'm not really sure how to respond as you've basically described all
recessions/bears and all market down-turns. Nothing new here. This is
what the business cycle is. Don't you think businesses failed
during bull cycles? This is the nature of risk.
What I find odd is no one seems to be thankful for anything.
We cant have an "apples to apples" comparison of the depression
because we already have so much more than them.
I have savings, investments, living conditions, real-estate, cars,
technology, vacations, entertainment that my grandparents never had.
Their "fall" in the great depression wasn't far from their normal
standard of living. (at least from the ones I was able to meet)
When you have little you don't have much to lose.
Today its all about "me-me". If anything goes wrong its always
lies and manipulation. Opportunity is never real, Freedom
is never real. Failure is never the truth it is always rigged.
The only reason the market exists is to make "me" money.
What about the rest of the world? Have they created as much
wealth, success, freedom? Are all their leaders honest truthful?
Nothing goes wrong there. They don't have downturns.
We have airplanes. How come we don't have a mass exodus
to countries with strong currencies and budget surpluses?
(if that's supposed to be all there is)
If anything they seem to want to come here.
I think this is all throughout society.
This is why today we have multi-million dollar baseball
players in bench clearing brawls(I'm upset, I don't have
to show class, I don't have to be thankful for my huge
paycheck, I don't have to be a role model for kids.)
and not too many years ago. We had Lou Gehrig
at deaths door considering himself "the luckiest
man on the face of the earth".
Apples to apples. I don't think its possible.
We seem too spoiled and weak.
(at least many do)
Thanks
diceman
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quite the contrarian, Dice
I wish i wasn't busy as all get-out today so that I could address your post properly
but I will point out that these extra-ordinary emergency measures that have been taken in the past several weeks in order to avoid complete financial meltdown certainly seems to indicate that this isn't just another matter of a market cycle or ordinary "market downturn" - business failure in the financial sector isn't failure in other sectors - and these particular massive and pervasive industry-wide problems that are threatening collapse aren't typical of those necessarily related to the business cycle.
I have one word: CreditAnstalt
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my old grandad once said "if the holes to deep, quit digging".
paulsons proposal appears to be nothing but a bailout, to his wall street buddies, at the expense of the american taxpayers. meanwhile the politicians want to appear proactive in an election year.
can wait too see an actual proposal and how its implemented.
amazing how it wasn't that long ago they were saying subprime problem was no big deal, and now the federal government is throwing a trillion dollars at the problem.
as far as the market is concerned, stocks were very oversold, and the outlawing of shorts. triple witching, sparked a rally. they love to pull their shananigans on triple witching.
let the lawsuits begin.
cheers comrades
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Well ...
I'd just like to share something with you ...
I was on the phone with my bean-counter yesterday ... when the rumor mill started ...
He has a PhD in Accouting and went into private practice full time after retiring from the local university ...
He was telling me how many of his clients had seen vast reductions in their credit lines ...
Apparently, many folks with Subchapter S Corporations will use what amounts to personal lines of credit to fund / float business activities ... etc ...
The reductions that he was seeing ... with no late payments ... or any of that ... was on the order of ... from $100,000 to $12,000 ...
Now ... as I'm sure that most of you know ... your credit score (FICO) is impacted greatly by the percentage that your outstanding credit represents of yout total available credit ...
In this one case ... they had a balance of roughly $10,000 ... so they went from using 10% of their available credit ... to using about 85% of their available credit ... and they hadn't done SQUAT ...
So ... having never made a late payment ... or operated outside the terms of their credit facility ... these people are watching their credit scores go from the high 700s or low 800s ... to the high 500s to low 600s ....
This not only greatly impedes their ability to secure additional credit ... but in many lending facilities, the interest rate that you pay is greatly impacted by your credit score ....
These people are looking at the interest rate going from below 8% ... to the low 20% range ...
And they haven't changed SQUAT ...
Now ... I'm not going to tell you that I'm even close to being smart enough to know all the different ways that this is going to impact the economy ... and I can't wait to see hohandy's explanation ...
But ... when I'm walking through the pasture ... and I feel my foot go "squish" ... and I start smelling a little something strange ... I don't need to know exactly what flavor it is ... to know that it just ain't good ...
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QUOTE (realitycheck)
Now ... I'm not going to tell you that I'm even close to being smart enough to know all the different ways that this is going to impact the economy ... and I can't wait to see hohandy's explanation ...
No need for a fancy explanation - my whole point is that failure in the finance industry has much more of a deleterious impact on the economy than say failure if Starbucks goes down the tubes - your story is an excellent illustration of how that happens.
Here's an example from an article in the NYT yesterday:
"The latest outgrowth of the housing crisis, the breakdown on Wall Street, threatens to gradually corrode economic activity on Main Street, mainly by disabling the credit on which so many everyday transactions depend — but also by frightening people.
Lenders of all types had already been raising the bar for borrowers, turning away all but the best customers. This week, they became even less willing to part with their money, further crimping budgets and family spending.
An economy propelled by easy credit for more than a decade is fraying as credit disappears. American Express, to take one striking example, is reducing the maximum credit limit for half of its tens of millions of cardholders"
And from there you go into your classic downturn. But this isn't being caused by the Fed tightening interest rates or as a result of a decision in monetary policy - this is being caused by an immediate reaction to bank failures an loss of confidence in the entire financial system.
just
The fact is, it's more than just one bad bank , which is why I characterize it as a "failure" of the "system" (and I'm not the only one). We haven't had such a systematic failure since the 1930s - this just isn't the same as your normal business cycles and bull/bear markets.
By the way - did everybody know that this past 2 day rally was the biggest 2 day rally on the Dow Jones Industrials since a 2 day 19% gain on .... Oct 30-31, 1929 (the first big snapback immediately following the crash) - and we know how that all turned out...
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