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Stocks in overseas market plunged today at the greatest rate since 9/11, as investors expressed concern about a U.S. recession and world financial crisis. Major indices in France were down 6.8 percent, Germany 7.2%, UK 5.5%, Toronto 4.7%, Mexico 4.8%, and Brazil 6.6%. The U.S. market was closed to honor Martin Luther King, but the Dow Jones Industrial Average futures are down 449 points and Standard & Poor's 500 futures are down more than 4 percent. Rumors are sweeping financial centers that the U.S. Federal Reserve will hold an emergency caucus and cut short term interest rates sharply before Tuesday morning's market opening.

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Comments

JohnnyVegas Jan. 21, 2008 @ 6:10 p.m.

Cannot wait until the market closes Tuesday.

I remember Black Monday very well, lets see if there is a Black Tuesday.

After years and years of running trade and budget deficits this country needs a wake up call.

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Don Bauder Jan. 21, 2008 @ 6:18 p.m.

Response to 6:10 p.m. post: If the Fed lowers rates very sharply tonight (Monday night), it's possible U.S. stocks will not take the hit on Tuesday that they would have taken if the market had been open today. However, it's also possible that lower rates are not the cure this time around. The lenders are concerned about credit quality. I agree that we need a wakeup call on trade and budget deficits, government and consumer debt, and overconsumption. Best, Don Bauder

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Anonymous Jan. 21, 2008 @ 8:57 p.m.

There's a consistent error in financial reporting.

Prices rising is always treated as good news.

Prices falling is always treated as bad news.

Don, the purpose of the market is to "find" the "correct" price. So the fact that these overvalued assets are being corrected is neither good nor bad, just a movement to be observed. Some will win, and some will lose.

Yet, in all the media, it's treated like a horse race instead of a market.

"It's up! Yippee!"

"It's down. We're all miserable."

Nonsense. As someone who owns no stock at all, I'm glad to see prices drop to the level that I might consider buying.

As to the drops in our currency, the same applies. There was longstanding unbalance, and now it is correcting itself. Exporters win, importers lose. That's not tragedy, just economics.

It would have been far MORE appropriate if the talking heads were gloomy when we reached 14,000. They should have been tut tutting about over-valuation instead of cheering like teenagers.

That's what gets so many of the smaller investors in trouble.

Best,

(yet another sdblogger)

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Don Bauder Jan. 21, 2008 @ 10:33 p.m.

Response to post of 8:57 p.m.: You make a good point. My father was a stockbroker, and always joked that the stock market was the only industry in which people didn't buy when merchandise was on sale. That's why there are two major motivations: greed and fear. When stocks are rising, greed takes over. People rush to get in because they think the market will move higher quickly, and they will miss the move. When stocks are falling, people don't get in because they fear prices will continue dropping. You hear the old expression, "Don't try to catch a falling knife." There may be some bargains tomorrow, but remember that the U.S. economy is sick: there is excessive government and consumer debt, excessive consumption, excessive trade and fiscal deficits. Inflation is rising. There is reason for fear. Best, Don Bauder

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Don Bauder Jan. 21, 2008 @ 10:42 p.m.

As of 10:40 p.m. West Coast time, Standard & Poor's futures are down 5.15 percent Monday evening. Other futures indices are down between 4 and 5 percent. There has been no word that the Federal Reserve will slash interest rates before the opening, but the word could come before the opening bell sounds. Best, Don Bauder

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Anonymous Feb. 14, 2008 @ 1:26 p.m.

Don, it's been a few weeks now. Let's talk consequences.

The Fed has thrown the Hail Mary pass and cut interest rates to the bone, but the stock market is still jittery.

What next?

Shouldn't we get ready for a sharp inflationary spiral?

My word, it sure looks to me like we've got continued asset price inflation, (even with the property bubble slowly deflating), and we've got commodities inflation, and with the continuing realignment of the dollar we're gonna get walloped with import price inflation.

Is this the master plan to pay off our debts? Inflate our way out of the problem...???

What about all the still unresolved obligations concealed within complex derivatives and other exotic products still floating around the world? Should we anticipate another six months of announcements?

"Oops, just found another couple billion in losses, but don't worry folks, we think we've got it all now."

How has devaluing the currency worked out historically? I seem to recall some major world powers losing considerably from such a strategy in the 17th, 18th and 19th centuries.

Now that the even that provoked your blog entry has passed, how do you assess the outcome, Don?

(yet another sdblogger)

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