Three Consecutive Good Days on Wall Street

We have not seen this in a while, three consecutive good days on Wall Street. This occurred because there were some small glimmers of hope. The were some indications that the economy’s downward spiral might be slowing. On Monday the markets fell to their lowest point in 12 years, but since then the indexes have bounced back roughly 10%.

Now we are not out of the woods yet, but a few days of light was welcome relief.

Stocks Up on Citigroup News

There was some actual good news from Wall Street this morning, and the markets responded. Led by financial stocks, the market made its first big move upward in weeks Tuesday after Citigroup Inc. said it had operated at a profit during the first two months of the year. Dow Jones industrials shot up more than 250 points.

Dow Headed towards 6000

The Dow has gone below 7000 today. I used to think that 7000 was the floor that this crisis on Wall Street would hit, but 7000 was not the floor, and 6000 may be the floor.

World Stocks Lower as Economic Fears Remain

President Obama's plan to reform America's costly health care system is supposedly the cause of another bad day in the financial markets. Supposedly concerns about banks and pharmaceutical companies, whose profits may be curbed by President Obama caused investors to sell. I don't believe it.

I believe people are using Obama as an excuse to cover their want to sell assets and get what profit they can.

European markets fell today with Britain's FTSE 100 plunged 2 percent to 3,834.89, Germany's DAX lost 2 percent to 3,863.96, and France's CAC 40 dropped 1.5 percent to 2,702.89. This was lead by Lloyds Banking Group, which fell 20%. In total European bank stocks as a collective are down 25 percent since the beginning of the year.

In Asia, stock markets were mixed. Trade was listless after a bruising, volatile month that saw the region's export-driven economies sank deeper into recession amid collapsing demand and their currencies wither.

Stocks Sink to Lowest Levels in a Decade

It's all gone. The Dow Jones industrial average tumbled 251 points to its lowest close since Oct. 28, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997. All the major indexes slid more than 3 percent.

Over a decades worth of capitol in the stock markets is gone, and I think it will be a long time before this money is remade.

As has been the case for the past nine months, financial stocks were the heart of the crash. Investors are still concerned that a number of the country's largest banks could be nationalized as they continue to suffer severe losses because of their mismanagement and the on-going recession. They're also worried that banks' losses will keep escalating as the recession sends more borrowers into default.

The market's decline extends massive losses from last week when the major stock indexes tumbled more than 6 percent. The major indexes plunged through the lows they reached in late November, at the height of the credit crisis.

All Gone

The Dow Jones closed down at its lowest level in six years. The gains in the market during the Bush years are all gone. The gains made after the crash which came in the wake of 9-11 are all gone. The Dow is at about half of its all-time high of 14,164, which was reached in October 2007. The total value of all shares of companies on the Dow has now dwindled to $2.45 trillion, down from $4.51 trillion. Bank stocks have been especially hit as investors grow increasingly nervous about the fragile economy.

This economic crisis is going to be one for the history books. The trouble is our government has become so split and dysfunctional, I'm not sure it can meet the needs of the crisis. Look at what has been happening in California. California is the world's 8th largest economy, but has a 42 billion dollar deficit. They needed a draconian budget of tax increases and cost cutting to keep going yet Republicans were not willing to work with Democrats and compromise. Luckily at the last minute the disaster was averted in California.

Dow Drops Almost 300

On the day that President Obama signed the stimulus package into law the markets took another tumble. The Dow Jones industrial average .DJI fell 297.81 points, or 3.79 percent, to 7,552.60. The Standard & Poor's 500 Index .SPX gave up 37.67 points, or 4.56 percent, at 789.17. The Nasdaq Composite Index .IXIC lost 63.70 points, or 4.15 percent, to 1,470.66.

Wall Street's slide pulled the S&P 500 and Dow to their lowest levels since November 20, when stocks hit 11-year lows. Just before the end of the session, the Dow briefly broke through its bear market closing low that was hit on November 20.

The day's losses brought the Dow down 13.9 percent since the start of the year, while the S&P 500 is down 12.6 percent and the Nasdaq has fallen 6.7 percent.

Michael Hirsh: Tear Down Wall Street

Michael Hirsh of newsweek has a very strong article in this week's magazine comes out strong for radical changes to Wall Street and the American economic system that has developed. He points out that the survivors of Wall Street melt down who appeared before Congress this week are 'too big to fail', but are doing just that. They're failing, now what should we do.

It was a classic populist spectacle, reminiscent of William Jennings Bryan's "Cross of Gold" speech or Huey Long's mid-Depression campaign to "Share the Wealth." There, arrayed before Rep. Barney Frank and other voices of the people's outrage, sat the former titans of Wall Street, each of them trying desperately to convince their congressional questioners, and the world, that they deserved some fate other than oblivion.

And these were the survivors! The hardy ones. The eight CEOs who appeared before the House Financial Services Committee on Wednesday—among them Jamie Dimon of JPMorgan Chase, Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley—were actually the bankers who have best navigated the financial turmoil in recent months after taking money from the "Troubled Asset Relief Program," or TARP. That may help explain why some of the angrier congressmen, like Gary Ackerman of New York (who last week roared to former SEC officials: "You couldn't find your backside with two hands if the lights were on!") were a little calmer this time. But it was a striking display of the new balance of power in America. One by one, the former "captains of the universe," as Rep. Maxine Waters described them, genuflected before their congressional masters. "I feel more like a corporal of the universe," Bank of America's Ken Lewis joked weakly. The CEOs described how much they've slashed their salaries and bonuses, how hard they've tried to lend out the billions of taxpayer dollars, and how quickly they'll try to get off the federal dole.

Truth is, this is all mostly whistling past the graveyard—which is where most of these giant banks are headed someday. Or at least let us hope so, while Washington still has the power to make it happen. With a couple of possible exceptions, these financial behemoths can't be allowed to survive and securitize us to the brink again, only to have to be rescued because they're too important to the economy to be permitted to go bankrupt. This is still the heart of the crisis—the problem that President Obama's stimulus package and Treasury Secretary Tim Geithner's financial plan don't even touch. If it weren't for the fact that too many of these banks are too big to fail—"systemic risks," in the jargon—we would have been through a lot of the worst already. Bankruptcy and oblivion is supposed to be the fate of market players who make bad choices. That's how capitalism works. The system gets cleaned out, the survivors deservingly pick up their failed rivals' business and get richer, and the economy comes back to life quickly. But that's what is not working now. Oversize screw-ups like AIG and Citigroup survive on, zombielike, with Fed and Treasury "commissars" on the inside watching their every move, because no one can bear the thought of how many other institutions they would take down if they failed.

Among those who appear to understand this is Federal Reserve Chairman Ben Bernanke. " 'Too big to fail' is an enormous problem," Bernanke said in his own congressional testimony on Tuesday. "We are very unhappy with this problem, and we think that it should be a top priority to fix it as we go forward, so that … the situation doesn't arise again." One of the most telling moments at the CEO hearing came when one congresswoman asked if any of them had grown too large. All were silent. At other points, the CEOs tried to make the case that, with a thaw in lending barely under way, the issue is not with them but with the "nonbank" sector that was responsible for most of the worst mortgage-lending practices during the bubble. What they didn't say is that some of their own companies, among them Bank of America, actually went out and bought the most predatory and seamiest nonbank lenders, like Countrywide Mortgage. Just swallowed them whole. They're incorrigible.

This is the main reason why, to the market's chagrin, Geithner declines to provide details on how to unwind the bad loans and assets at these big companies. Geithner's predecessor, Hank Paulson, dithered over this problem as well. The indecision has been dragging on for five months. That's because the problem is all but insurmountable. If you value those toxic assets at actual market levels, most of these banks would become insolvent. Letting them fail would almost automatically trigger the depression the government has been trying to avert. But if instead the government artificially inflates the assets' values, it commits itself to spending trillions more in public money at a time when Congress and the public are fed up with bailouts (the IMF estimates that potential losses are still $2.2 trillion; Bernanke countered Tuesday that only half of those are with U.S. institutions, but he admitted the banks still have yet to write down about $500 billion in losses). And if the government declines to do either of these things—if it neither values the bad assets at market level nor buys them up at inflated prices—bank stocks will continue to be suspect and private capital will stay on the sidelines. The economy will remain frozen.

In other words, there are no good choices. According to a Treasury source, Geithner knows what a lot of these assets are worth. "The government has gone through these assets very carefully," Citigroup's Vikram Pandit told the House committee. But knowing the value doesn't help. So the Treasury secretary is trying to finesse his way through, probably case by case, hoping he can gradually nudge asset values higher by restoring confidence to the market.

Geithner may be too optimistic. As one senior economic official in Washington said to me the other day, "the Obama administration has got as much political capital as it's ever going to have. This is the time to lay it all out." In other words, tell everyone just how bad the problem really is. It's more than a matter of how much public money to commit. The "fundamental reshaping" of the financial system that Geithner referred to on Tuesday has to be part of the solution as well. The Citigroups and AIGs should be carefully broken up as soon as possible.

True, you're not going to place artificial limits on a firm's size; that's a bridge too far into socialism. But as John Kay of the Financial Times wrote on Wednesday, there's no reason why we can't rediscover the wisdom of Senators Glass and Steagall during the Depression. "Tension between the buccaneering culture appropriate to trading and investment banking and the meticulous processing and caution needed for retail banking is perpetual," Kay wrote. Indeed, as Joseph Stiglitz wrote in 2003, the wisdom behind Glass-Steagall goes "back even further to Teddy Roosevelt and his efforts to break up the big trusts." Let's simply acknowledge that. Yes, finance marches on. We're not going back to 1933. But some things about human nature never change. Now that we understand the fallacy of the "dispersion of risk" idea—which Wall Street, with a big assist from Alan Greenspan, sold us on before the crash—we should arrive at about the same place as Glass, Steagall and Teddy Roosevelt did. We can't have a free-market economy dominated by institutions so huge that they don't have to play by free-market rules. And yet we still do.
© 2009

Another Rough Day on Wall Street,

It was another rough day on Wall Street, with the Dow falling 245 points, the other major indexes down about 3% each.

Get Ready

It is going to be a bad day on Wall Street. This is what we can expect now that the $14-billion emergency bailout for U.S. automakers collapsed in the Senate. The deal to help the auto industry fell a part last night as Republicans tried to break the UAW. Don't believe those lying Repuglicans, this had nothing to do with some principle, it is all about breaking the union. The collapse came after bipartisan talks broke down over union wage cuts, the Repugs wanted the union to basically handover the farm.

Markets oversea's are already falling hard on the news. U.S. Markets are expected to fall. Harry Reid has said he hopes Bush will tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain, and if GM and Chrysler fall it will need help.

The implosion followed an unprecedented marathon negotiations in Washington among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the union's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Leave it to the Repuglicans to put ideology above country.

Wall Street Ends on a High Note

Wall Street ended the week on a high note, with the Dow closing up about 3%. The other indexes did even better, with the S&P finishing 3.6% higher, and the Nasdaq closing up 4.4%. This market upswing happened despite dismal employment numbers, and a new report that U.S. retailers posted the worst November sales in more than three decades. Stocks reversed early losses and closed sharply higher as the data raised hopes that Washington will again step in to help the economy. The market's advance left Wall Street with only moderate losses for the week, the result of a nearly 680-point slide in on Monday.

While the deluge of bad economic readings have weighed on the markets in the past three months, investors are growing somewhat accustomed to the news, and so hopefully the roller coaster will start to flatten out. The stock market, which generally looks ahead, tends to recover six to nine months before economic reports show a recession is abating. At some point, investors likely will determine that a recession has been fully built into the market's expectations and will begin placing bets on a recovery. I think we have not reached this point yet, but we could be drawing closer.

Dow ends up nearly 400 points after bailout of Citigroup

Wall Street soared Monday for the second straight session as investors reacted to news that government had agreed to bail out Citigroup. The Dow finished up nearly 400 points today. This, combined with Friday's gains, marked the Dow's biggest two-day percentage gain since October 1987. The Dow's 891-point climb over the two sessions also wiped out the 872-point plunge it suffered on Wednesday and Thursday, when investors were anguished over the fate of Citigroup Inc. and financial companies in general, and the future of the nation's automakers.

All the major indexes jumped more than 4.5 percent.

S&P 500 sinks to '97 low

This is getting very scary:

"Wall Street slumped Thursday afternoon and the S&P 500 closed at an 11-1/2 year low as fears of a prolonged recession sparked a massive selloff.... The Dow Jones industrial average lost 445 points or 5.6%. It closed at the lowest level since March 12, 2003, just above the low of the last bear market. The Nasdaq composite lost 5.1% and also closed at its lowest level since March 12, 2003."

The Dow has lost 872 points, or 10.4%, over the last two sessions and now sits at 7552.29. On the New York Stock Exchange, losers beat winners by more than ten to one on volume of 2.23 billion shares. On the Nasdaq, decliners topped advancers by five to one on volume of 3.20 billion shares.

Goldman CEO and Top Execs Will NOT Receive 2008 Bonuses

Well, it's a start.

Now hopefully we start to see more of Wall Street fall in line with similar announcements.

Goldman Sachs Group Inc. CEO Lloyd Blankfein and six other top executives at the bank will not be receiving cash or stock bonuses for 2008, a spokesman said Sunday.

The decision was made by the seven executives themselves, said spokesman Lucas Van Praag, and approved Sunday by the Wall Street firm's compensation committee. The executives made the decision "because they think it's the right thing to do," Van Praag said.

The seven executives include Blankfein; Presidents and Co-Chief Operating Officers Jon Winkelried and Gary Cohn; Vice Chairmen John Weinberg, J. Michael Evans and Michael Sherwood; and Chief Financial Officer David Viniar.

They will receive no cash bonuses, no stock, and no options for 2008 — just their salaries, the spokesman said. Companies typically release compensation figures for top executives in the spring as part of their annual proxy statements.

Last year, Blankfein received total compensation of $54.0 million, according to calculations by The Associated Press — making him the 6th highest paid CEO at a Standard & Poor's 500 company in 2007. His salary that year was $600,000.

Intel Takes a Hit

Because of the nature of it's product, chipmaker Intel has become a bell-weather for the Tech Market. It was therefore not good news when Intel reported late yesterday that it's expected earnings would be taking a hit.

And it wasn't a little hit, it was a bat to the head.

The chipmaker on Wednesday was forced to slash its fiscal-fourth-quarter revenue by $1 billion because of "significantly weaker" demand for its products. Intel now says it expects to post $9 billion in revenue for the quarter, plus or minus $300 million, the company said, compared with a previous forecast of between $10.1 billion and $10.9 billion.

This news caused stocks to drop late Wednesday, so the market ended down 411 points to 8,283.

Fox News Blames Barack Obama For Stock Market Fall

Of course they do.


Over the last two days the stock market were the worst in recent history since, at least since 1987. The Dow Jones industrial average has lost nearly 1,000 points and the S&P 500 which is a broader measure of stocks, has lost nearly 10 percent of its value.

There should be no surprise that Fox News has seized this opportunity to lay it all on President-elect Obama. Many of the guest pundits and hosts have suggested, or even claimed outright, that the stock market plunge is the direct result of Barack Obama’s presidential election victory:

– Gretchen Carlson: “There’s a lot of feeling in the market not reacting very well to the election of Barack Obama.”

– Fred Barnes: “We have seen the stock market go down over 800 points the last two days. There is great uncertainty out there about [Obama’s] policies.”

– Dick Morris: “Now the other thing that I predicted in “Fleeced” is that the stock market would go crazy after he was elected. Not just because he’s a radical, not just because he’s a Democrat, but because he’s going to raise the capital gains tax. […] Its going to continue to tank.”

Even Fox News’s business guru Neil Cavuto chimed in, wondering if “there is a connection” between the falling market and the Obama election. However, minutes later, he said, “You don’t want to glean too much politically into it.”


You can watch a compilation here:


In fact, the recent market plunge has absolutely nothing to do with Obama. As The New York Times noted, “There were no clear catalysts that spurred the sell-off…beyond the regular drumbeat of poor earnings from the corporate sector and bleak data on the economy.” Moreover, “[s]lumping retail sales and weakness in the auto sector” also helped send stocks plummeting. One market expert noted that “regardless of who won, there is no quick-term solution to the global economic crisis.”


The Wall Street Journal is reporting that stocks have rebounded this morning. Perhaps we should expect then that Fox News will give the credit to Obama. I didn't think so here.

Wall Street Steady Today

After two days that saw the Dow drop over 900 points to below 9000 again, and in spite of poor job data, Wall Street is holding steady today. Stocks seem set to recover some of the heavy losses sustained during the biggest two-day slump since 1987.

European stocks were higher ahead of the open on Wall Street. The FTSE Eurofirst 300 rose 1.2 per cent to 909.21. Asian equity markets were volatile, falling sharply before recovering most losses.

A thaw in the credit markets has helped the market today. The rate at which banks lend to each other, measured by three month dollar Libor, fell to a four year low following a fresh round of global interest rate cuts, fixed at 2.29 per cent.

World Share Prices Set for Worst Month Ever

Reuters is reporting that October was the worst month ever in financial history. Dating back to 1920, there are only 4 comparable months in terms of market volitility, and loss of wealth that I could find. The first was September 1931 where the market was down 29.94%, second was October 1987 where the market was down 21.76%, third was May of 1940 where the markets were down 23.95% and last was March of 1938 where the market was down 25.04% which would mean that right now, October 2008 is the single worst month in financial market history.

Shares in Asia and Europe fell on Friday, heading for their worst month ever, while the low-yielding yen shot up as Japan's interest rate cut failed to quell concerns about the deteriorating global economic outlook.

The Bank of Japan joined a global easing cycle by trimming interest rates by 20 basis points to 0.3 percent, but disappointed many who had expected a bigger quarter point cut.

The move followed the Federal Reserve's decision to cut interest rates to 1 percent this week -- its lowest level since June 2004 -- to stave off a prolonged recession.
The euro zone, Australia and Britain are expected to follow suit next week.

However, investors feared a round of rate cuts was not enough to stem the flow of worsening corporate earnings and bolster consumer consumption in major economies which might be already in recession.

In response, oil and commodities fell sharply. U.S. crude oil fell 3.6 percent to $63.58 a barrel, down some 55 percent from its record high around $147 set in July. Gold fell to $724.10 an ounce and was set for its largest monthly fall in more than 30 years.

Dow up 172 as stocks stage a comeback

Energy stocks powered an afternoon recovery on another wildly volatile day. Microsoft shares came in after the bell with better than expected earnings. Stocks mostly recovered from big losses at the close of a volatile day, despite weakness in technology stocks. At the close, the Dow Jones industrials were up 172 points, or 2%, to 8,691. The Standard & Poor's 500 Index was up 11 points, 1.3%, to 908, but the Nasdaq Composite Index was off 12 points, 0.7%, to 1,604.

The market laggards were health care and materials stocks.

Futures trading tonight suggested stocks would open Friday slightly lower in expectation that members of the Organization of Petroleum Exporting Countries will agree to cut oil production to support slumping crude prices.

The Horror Ride Continues

A late afternoon barrage of selling sent the Dow Jones industrials tumbling almost 700 points before the index pulled back to close down near 500. Weak corporate earnings stoked fears that the government's financial intervention won't keep global economies out of recession.