Dow down 600 points...think its gonna get worse...

[chipwich]

No one really knows if we are at a point of true capitulation.  It looks close for the time being, but as earnings erode (and they will over the next 2 quarters), you will see share prices drop to reflect those earnings.

Right now, valuations are not in focus, earnings (and lack thereof) are in focus.  You could have a rally tomorrow or the next day.  You could also have another sharp down day.  I hate to try and time a market of so many unknowns; it's like reading tea leaves.  I tend to agree with Driven's assessment of seeing 8,500, but I doubt any of us really know for sure.

You could see 10,000 just as easily as you could see 8,500 in the near future.  Either way, you would have to get out of the market soon enough to realize your profit.  Volatility and day-trading only work if you can time your transactions correctly. 

Your best guess in trying time a rally is to look at Asian and European overnight stock trends.  Also, look at the 1 month libor rate.  If it drops overnight, that means banks are lending to each other and investors will feel better about the credit markets flowing again.  If libor rises, it is a very bad sign that the credit markets are still choked.  If this rate drops for about a week, then it is a good idea to go ahead and get back in the market (at least for the short term). 

Overall, I see the market headed down at least to 8,000 before this is all done with.  It may be next week, next month or early next year.  I continue to dislike financial stocks (sold my Goldman stock last Thursday at a 6% profit).

I am stocking up my cash because I see capitulation in the market completing within 3 months.  Stocks will be very cheap and we can all ride a good wave of equity prosperity.  The occasional sucker's rally is nice to get into, but as always with great reward, you end up taking great risk.  I tend to be a bit more risk averse than others.

[whitey]

Everyone is looking at the stock market for capitulation, I don't think we will see it.  Everyone is waiting for a big sell off with high volume as a signal to get back in, I expect a back door rally starting in the bond markets.  The bond market started to move higher today almost at exactly the same time the market turned around, money moving out of bonds signals the movers and shakers looking to take on more risk in stocks.

Paulson is also looking at directly injecting cash into banks in exchange for equity in those banks instead of or in addition to buying MBS'.  If they can set up an open exchange market for the MBS' at a low cost and then use the vast majority of the $700 billion to directly infuse cash into the banks I see that as a much more beneficial solution for the system and taxpayers.  We get MBS' into a more liquid setting with an open trading forum, banks get an infusion of cash if needed and taxpayers get equity in those banks.

[Lunican]

Dow closes at 8,579.

[chipwich]

Yup, another bad day on Wall Street. 

As long as libor stays high, things will continue to get worse.  I am skeptical of bank injection plans, becuase I just do not see it really easing banking fears right now.  Banks are in survival mode and will remain so even after govenrmnet backing.

I believe tomorrow will be a very down day as well. 

Libor Dollar Rate Jumps to Highest in Year; Credit Stays Frozen

By Anchalee Worrachate and Gavin Finch

Oct. 9 (Bloomberg) -- The cost of borrowing in dollars for three months in London soared to the highest level this year as coordinated interest-rate reductions worldwide failed to revive lending among banks for any longer than a day.

Attempts by policy makers to restore confidence to money markets are being stymied by almost daily crises among financial institutions. Iceland's government took over the nation's biggest lender today to keep the country's banking system working. American International Group Inc., the insurer taken over by the U.S. government, may need $37.8 billion of extra funds, the Federal Reserve Bank of New York said yesterday.

``To see little or no reaction in the fixings is very disappointing and reinforces the fact that Libor is broken and the transmission mechanism from central banks isn't working,'' said Barry Moran, a currency trader in Dublin at Bank of Ireland, the country's second-biggest bank. ``Things are still very stressed and we don't know what's going to fix it.''

The London interbank offered rate, or Libor, for three-month loans rose to 4.75 percent today, the highest level since Dec. 28. The Libor-OIS spread, a measure of cash scarcity, widened to a record. The overnight rate fell to 5.09 percent, still 359 basis points more than the Fed's 1.5 percent target rate.

The European Central Bank today offered banks as much cash as they need for six days at its benchmark rate of 3.75 percent, bringing forward new measures to soothe money markets. It also loaned banks a record $100 billion in overnight dollar funds, allotting most of the cash at 5 percent, down from 9.5 percent yesterday.

`Holding Cash'

South Korea, Taiwan and Hong Kong cut interest rates today, a day after reductions by central banks including the Federal Reserve and European Central Bank that were designed to stem damage from the global financial crisis. The U.K. government pledged yesterday to spend 50 billion pounds ($87 billion) to stave off a collapse of the British banking system.

``I don't see a wave of liquidity coming into the market,'' said Alessandro Tentori, an interest-rate strategist in London at BNP Paribas SA. ``People are still holding on to their cash because there's still a great deal of uncertainty out there.''

There were signs of a thaw in short-term markets. Overnight borrowing costs for companies dropped to the lowest in almost two weeks after yesterday's rate cuts and the Fed committed to buying commercial paper. Yields on the highest-rated one-day commercial paper placed by dealers declined 1.15 percentage points to 2.35 percent, according to data compiled by Bloomberg. Rates from Sears Holdings Corp. and HSBC Holdings Plc fell, the data show.

Iceland, AIG

Interbank lending rates have climbed as financial institutions stockpile cash to meet funding expectations and remain skeptical that central bank efforts to unblock markets will work. The three-month rate in euros held at a record high of 5.39 percent today.

Iceland's government today seized control of Reykjavik-based Kaupthing Bank hf, completing the takeover of a banking industry that has collapsed under the weight of its foreign debt. Late yesterday, the Fed said New York-based AIG can swap as much as $37.8 billion of its ``investment-grade, fixed-income securities'' for cash to ``replenish liquidity.''

Money-market rates rose today in Hong Kong, Singapore and Japan to the highest levels in at least nine months. Hong Kong's three-month interbank offered rate jumped to 4.4 percent, a one- year high. Singapore's comparable rate for dollar loans increased to 4.51 percent, the highest level since Jan. 8.

`Of Little Help'

The Libor-OIS spread, the difference between the three-month dollar Libor and the overnight indexed swap rate, climbed 23 basis points to an all-time high of 348 basis points. The average was 8 basis points in the 12 months to July 31, 2007, before the credit squeeze began. The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, exceeded 400 basis points for a second day.

``Libor spreads are still wide, which suggest offshore banks are not willing to take more risks lending to other banks,'' said Cezar Bayonito, a liquidity trader at Allied Banking Corp. in the Philippines. ``Interest-rate cuts will be of little help in the near term because the issue is trust, not rates.''

Libor, set by 16 banks in a daily survey by the British Bankers' Association at about noon in London, determines rates on $360 trillion of financial products worldwide, from home loans to derivatives. Member banks provide estimates on how much it would cost to borrow in 10 currencies for periods ranging from a day to a year.

Sears' commercial paper rate declined by 1 percentage point to 3 percent, according to Bloomberg data. The rate for HSBC fell by 25 basis points to 2 percent. Companies sell commercial paper, which matures in nine months or less, to help pay for day-to-day expenses such as payroll and rent.

Yields on three-month Treasury bills were unchanged at 0.62 percent

[Driven1]

one thing is for certain...when it hits "the bottom" it won't stay there more than a few days and will shoot back up violently (recovering 25% or so of losses in a week or so) .  so to say that the market is realistically valued at X...yeah...maybe...maybe for a day. 

btw, CNBC had quite a few famous short-sellers on tonight.  everyone, in turn, when asked if they would short THIS market now (at 8600), replied a resounding "NO".

i agree - tomorrow is another down day. 

DOW goes no lower than 7750 though.

one thing is for sure - this is exciting stuff!

[Driven1]

some interesting notes...

GM is now at a price lower than 1950.  GM market cap is lower than it was in 1929. 

DOW has lost 2,200 points in 7 days.  we are down 42% from all-time market high one year ago today.  DOW is now around same place it was in 1997 (of course, you would've still made decent $$ in an DOW index fund with dividends reinvested).

GE is at an almost 10 year low. 
Sprint is at a 21 year low. 
Bank of America is at 1996 prices.

[Driven1]

still way further to go. and when the municapal bonds market cracks open like a rotten egg, the dow is going to sink a little further.

muni bond market has already been killed.  since march when Ambac and MBIA hit the fan.  that's old news.

[Driven1]

Gonna be a bad day here tomorrow!

NIkkei down 10% right now.  Futures trading suspended there.  Mitsubishi Estate Co (2nd largest prop developer) just became the country's first ever failed REIT. 

The Osaka Securities Exchange halted trading in Nikkei 225 Stock Average futures for 15 minutes until 9:23 a.m. after a plunge triggered circuit breakers. The futures were suspended because of a decline of more than 1,000 points and as the value of the underlying Nikkei average differed from the futures value by more than 200 points.

http://www.bloomberg.com/apps/news?pid=20601101&sid=aI999JNaYtn4&refer=japan

[chipwich]

tomorrow afternoon should be a pretty good time to buy into the market.  If you can stomach the risk, I think there will be some good buys after the projected big sell-off.

I imagine early next week should be good for equities.  I project a short rally on Monday/ Tuesday.

I will bargain shop tomorrow.  Who wants to come?

[Driven1]

i'm transferring in more cash myself.  sold all gold today & invested those proceeds and all the rest of my MMKT funds.  if i'm going down, it's gonna be everything!!!!!  kind of freaking exciting/scary.   

"these are the times you make money.  you just don't know it for a year or two."

btw, here is a very good article from the journal...

We're getting bludgeoned to death. Day after day. Five, six hundred points at a time.

No wonder lots of people giving up. They are throwing up their hands at all that "invest for the long term" stuff, and selling out for what they can get. "Get me out of here!" they cry.

Mutual fund investors withdrew another $9.4 billion in the most recent week, according to industry analysts AMG Data Services.  You can't blame them. This is really tough. It takes a heavy emotional toll. And every day you hang on, hoping it's going to stop, and it falls again and you kick yourself for not selling yesterday.

This is why our grandparents had absolutely no interest in stocks throughout the 1940s and 1950s. They remembered how tough it could be.


The Dow was last below 9000 five years ago.
We are living through history. What makes this crash stand out is the sheer speed of it.

The bear market that followed 2000 took three years. The huge slump in the early 1970s took two.

This time around, world markets have nearly halved in just a year.

Only one crash fell that far faster: Yes, 1929. And I'm sorry to say that slump went on for another two years. By the end the Dow was down 90% from its peak and the U.S. economy had shrunk by a third.

No, I don't think anything like that will happen this time. I don't think Hitler or the Charleston are going to make a comeback either. The 1930s were the 1930s.

But here's the problem. If you get out of the market here, you may never get back in.

The financial crisis we're going through resembles, in some ways, the titanic financial crash that Great Britain saw in the early 1970s. Their real estate market collapsed, setting off a similar chain of events. Their government was way behind. Their banks imploded â€" it is still known as "the secondary banking crisis." Their stock market fell 75%. Then, like now, investors were bludgeoned to death, one after another, until there were none left.

But when the stock market finally turned around, it nearly doubled in a few weeks. Those who had jumped off earlier missed it. It simply moved too fast to jump back on.

I don't know how much further this will fall or how exactly it will end. And as I've said before, I don't trust anyone who says they do know. If you are investing, the only way to protect yourself against further falls is to keep buying little and often.

We are seeing everywhere signs, not merely of selling, but of wholesale, mindless panic. IBM just beat expectations: The stock fell.

Johnson & Johnson and Procter & Gamble shares just plunged 8%. Microsoft, which may end up as the true lender of last resort after Uncle Sam folds, fell 3%. Diageo, the alcohol giant that makes Guinness, Smirnoff vodka and lots of scotch, fell 4%. So did Altria, aka Philip Morris.

Tax-free municipal bonds are yielding far more than taxable Treasurys. Small company stocks, especially in Europe, are being given away for a fraction of their breakup value.

Stocks, world-wide, stopped being expensive by any serious measure earlier this year. Now, many of them are downright cheap. World-wide, the equity bubble that first inflated in 1998-2000 and then re-inflated in 2005-7 has now thoroughly been burst.

It's easy to forget how high share prices went back then, and just how far they have fallen now.

Compared to annual sales, or net assets, or annual earnings, or dividends, global stocks are at or near the lowest levels seen in maybe 30 years. History is pretty clear. Buying good stocks when they are cheap, and holding on for a long time, has been very good business. The further prices fall, the truer that is.

Write to Brett Arends at brett.arends@wsj.com

[Driven1]

i read an analyst today saying that this last week or so has been smaller investors who have been getting their quarterly statements (arriving end of Sept, beginning of Oct) and liquidating.  that is usually a good sign.  but who knows - now, i actually think that 8,500 is more likely than 10,000 here in the near future.

didn't know it would happen the next day, though. 

[chipwich]

i read an analyst today saying that this last week or so has been smaller investors who have been getting their quarterly statements (arriving end of Sept, beginning of Oct) and liquidating.  that is usually a good sign.  but who knows - now, i actually think that 8,500 is more likely than 10,000 here in the near future.

didn't know it would happen the next day, though. 

Almost prophetic Driven.  You should share your palm reader's contact information with the rest of us.

But seriously, good call

[Driven1]

panic selling across Eruope and Asia.  markets down from 7-10% across the board.  S&P futures down 4% already here. 

a huge capitulation at noon, followed by a record reversal would be nice today!

[Doctor_K]

Cripes.  Dow down 5% and then some within like first 10 minutes of the opening bell.  Was down over 1,000 at one point.  We've blown way past that 8,500 mark Driven hypothesized about.  Unreal.

Dollar still holding its own against the Euro and Pound.  Down some more against the Yen; up against the Loonie and Peso.

Crazy times these last few weeks.

[Driven1]

i think i got real lucky this morning (definitely for the really, really short-term - today maybe - and also for the really long term).  with the DOW down 700 points this morning, i put in my new buy orders.  it then rallied to only being down 30 points.  bunch of computer buying started happening i think.  Dow down 200 points now.

this morning...
picked up CX at 5.50... now 7.10
picked up more PM at 36... now 38
picked up a good amount of CSIQ (thank you bail out package) at 10... now 11