Wednesday, October 8, 2008

19 DAYS TO ZERO





Money & Company



Tracking the market and economic trends that shape your finances.

Dow zero? At this rate, we'll almost be there by Halloween .

4:48 PM, October 7, 2008

Just 19 more days like this one and the Dow Jones industrial average will be at zero. And we can all start over from scratch.

Stocks were hammered today by what many traders described as another round of desperation selling.

The Dow lost 508.39 points, or 5.1%, to 9,447.11, its lowest since September 2003.

We said goodbye to Dow 10,000 on Monday. Today, the Standard & Poor’s 500 index closed below the 1,000 mark for the first time in five years, tumbling 60.66 points, or 5.7%, to 996.23.
The severity of Wall Street’s decline over just the last 2 1/2 weeks has been breathtaking.
By the classic bear-market yardstick -- a minimum 20% drop in a major stock index -- the S&P 500 now has experienced a bear market in just 12 trading sessions: The index has fallen 20.6% since Sept. 19.

That would be a bear-within-a-bear. Measured from its record high a year ago, the S&P now is down 36.3%.

Yes, investors are fearful of what will happen to the economy because of the credit crunch. But when selling reaches this magnitude, some portion of it surely has to be disconnected from economic fundamentals.

Art Hogan, veteran analyst at Jefferies & Co. in Boston, noted the relatively uniform percentage declines in broad market indexes today: 5.4% in the New York Stock Exchange composite, 5.6% in the S&P small-stock index, 5.8% in the Nasdaq composite.

"That tells you it’s just waves of people selling everything that’s traded," Hogan said.

Who is so desperate to get out? Many analysts point to hedge fund managers, who are believed to be facing another round of massive redemption notices from clients who want their cash back.
"You’re seeing selling by people whose hands are forced now," said Christopher Johnson, head of Johnson Research Group in Cincinnati.

Ditto for stock mutual fund managers, as retail investors join the exodus.

Then throw in gun-to-the-head selling by investors who bought stock on margin and now are facing margin calls by their lenders -- demands to put up more cash to offset the tumbling value of their portfolios.

As I noted in this post on Monday, everyone’s looking for signs of capitulation -- a final deluge of selling by investors too disgusted and demoralized to hold on any longer.

"Bottoms don’t happen until everyone walks away," said Johnson.

The last two days certainly have had the feel of capitulation. But is it enough, already?
Some analysts say there still are too many market pros reluctant to exit stocks because they’re sure a bottom is near.

Mark Hulbert, who tracks investment newsletters, wrote today on MarketWatch.com that Monday’s market dive -- which saw the Dow off 800 points before recovering about half that loss -- probably was another capitulation false alarm.

"An eagerness to declare that capitulation has occurred probably means that it hasn't," Hulbert wrote. Read his piece here. And be prepared to weep, if he’s right.

Photo: On the NYSE floor today. Richard Drew / Associated Press
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Dave Israel

9 comments:

Mike said...

If You are a long, you have not lost any money unless you sold.It might take a few years to get even though.

Anonymous said...

Why is this of any interest to anyone in Century Village ? Any person who is retired and gambles with his money in the stock market deserves to lose it ALL, because he's an idiot.

Anonymous said...

This is great stuff, real life, and these posts are terrific I forwarded this to friends. I watch CNBC plenty, better than sitcoms. Some of our brains are not retired. Clearly you have not looked at the inhabitants of CV lately.

UCO President said...

Hi A Nony Mouse
Oct 8, 2008 12:13:00 PM,

I suspect you would be surprised at how many folks in CV are in The Market one way or another; Mutual Funds for example.

The current Global Economic crisis is unprecedented and impacts us all.
Mike suggests that we "wait a few years"...some in CV do not have the time to wait.

Dividends are being cut by corporations great and small; does this impact CV residents?

Be careful; do your research and rig for heavy weather.

The Federal Government is now managing major segments of the economy; a recipe for disaster.

Dave Israel

The Nutmegger said...

David:

What are your thoughts of
what AIG did when they
were bailed out. THEY
THREW THEMSELVES A $440,000
SPA PARTY AND TODAY I FIND
OUT THEY ARE PLANNING
ANOTHER PARTY NEXT WEEK.
They should all be fired
and thrown in jail.

Anonymous said...

nutmegger, an example of how, brash and insesitive in America we become, of cause they knew by what they did would bring outrage, as what congress did in this last vote,they don't care when are we going to realize this,another of fleccing of america story that makes us more outrage. We don't have no money for health care, medicare, social security, education, but money for everthing
else even though we have to borrow it???
Bin laden stated a few years back
we would be bankrumpt he knew by
putting our military on far east soil was the first step,you can win a military war but not a culture one make no mistake, and he also knew we would self distruct our own selfs by the way we have and also our leaders have these last (40) years, weapons of mass destruction we use this term so many times we forget it's true meaning, all the smart people with these deceptive loans, politicians
ruining this country, yes keep telling other nations there weakness , but all must know our's
and what we have become thru perception of us here, we talk %
OUR LEADERS has the lowest ratings
we also say this so often it loses it's meaning, so to this writer we need change, it will be years before we get out of this henius
domestic situation, and the globel
one GOD have MERCY on ALL!!!!!!!!!
Those Souls who gave the ultmate
Sacrifice, I will say this on behalf of them, those responsible
you have defamed and tarnish the
America they Defended with Courage
and Others who were spared how can you look them and also all Americans in our eyes????????????
Maybe you can or can"t, but every morning you have to look into that mirror and take a look into your own EYES,and the truth shall be Known!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Mike said...

Mike made no suggestion of any kind. I just stated my opinion.

Anonymous said...

Dave, why do you encourage abberant behavior ? If you invest in the stock market instead of putting money in a FDIC bank, you get a greater return on your money because of the added risk. And what is that added risk ? The possibility that you will lose all your money. So when people lose all their money, they got what they deserve.

I learned this in grade school and conducted my whole life accordingly.

As you sow, so shall you reap.

Anonymous said...

Anon, If you have not studied the stock market since grade school your advice is good. However if you study constantly this is a day traders dream. ‘ Scuse me I have to go reap some more.
Of course no one risks all their $$.