500 pts. later, how will we save ourselves?

[dd74]

It feels like nothing's going to stop this slide. A 500-point dive is quite a correction. Any good suggestions out there as to what we'll do to correct this?

What can/should we manufacture? Is there a "New Deal" that needs to be put in place? Should we just wait it out?

[legion]

Wait it out.

The best the government can hope to do is to saddle future generations with more debt to solve today's problems--that's what the New Deal did. And to be honest, the New Deal didn't solve anything, WWII did.

[Rot 911]

Originally Posted by dd74

It feels like nothing's going to stop this slide. A 500-point dive is quite a correction. Any good suggestions out there as to what we'll do to correct this?

Buy. I bet the market goes up 200-300 points tomorrow.

[jyl]

Market is very oversold, implied volatility has spiked, Fed meeting tommorrow, huge amount of cash on sidelines, fast money/hedgies looking for trade to save their year. With right Fed action, could be set up for a bear market rally.

[kang]

Originally Posted by Kurt V

Buy. I bet the market goes up 200-300 points tomorrow.

If not tomorrow, sometime soon.

[schamp]

I figure George W had a lot of calls and meetings on the Lehman deal. Somewhat suprised he let them go under. Might be because of AIG or someother large institution getting ready to fail in the next couple of days. Lots of people got hurt today.

[Porsche-O-Phile]

Market will drop another few hundred points this week, probably on the order of 400 or so then retake a hundred or so on Friday, putting it at about 10,500. I suspect it'll flop around there for a while until the next torpedo hits the financial sector, probably in the form of a Washington Mutual bankruptcy or Citigroup failure. That will be a BAD day, probably worse than today. After that, we'll be down below 10,000 which is frankly where we should be right now. Add to that 4Q retail numbers which are going to be in the toilet, rising unemployment and inflationary fears and uncertainty over the presidential election and I think things stay "low" until the beginning or middle of next year at best. HOPEFULLY the start of a slow crawl back up after that.

The underlying poison in the system stemming from the idiocy in the housing markets for the last 7-or-so years will take a LONG time to purge out. This one isn't going away anytime soon.

And worse, we don't have much in the way of domestic manufacturing left to create exportable goods. Our biggest exportable good right now is dollars because they're so cheap. Well, that and selling off our own country.

We've got big, big, long, deep problems that go a lot deeper than today's failures.

If there's any role for government in jobs creation (like a "new deal") now it is for 100% energy independence within 15 years. We could do it if we committed to it "Manhattan Project" style. And it'd give us something to rally behind. But the big question is can/would the government be able to do it without mortgaging our kids' futures? Given their history of drunken sailor spending, probably not.

[JeremyD]

Ugly - my bet is the fed decreases the interest rate a 1/4 point -

[M.D. Holloway]

When times are the worst, they are the best for those with direction and execution, solutions that actually can be traced back to proper work that provide real value. Anything can work with focus, ambition and logic.

[Pazuzu]

Originally Posted by Porsche-O-Phile

After that, we'll be down below 10,000 which is frankly where we should be right now.

I agree, I would love to see it at 10,000. That would give me faith again that our market is properly quantifying the US economy and the businesses within. right now, it's a number that has lost all meaning when connected to our commercial sector.

[Porsche-O-Phile]

I haven't done a company-by-company estimate of the constituent companies within the DOW index to estimate this, but my gut feeling is that the "true" value of the DOW index is somewhere around 9,000 or so. I think getting to (and above) 10,000 was driven by largely emotion rather than true rational valuation and of course anything after that (largely fueled by "easy money" pumped into the economy by liquid lenders and house flippers and Don Trump wannabes with their paper profits) is largely just as fake as the mortgages and housing "profits" too. I hate to come off as too "doom and gloom" - that's really not my intention, but the problems here run very, very deep and very, very broad. My hope is that honesty and sanity will return to the markets quickly and the people that are going to (deservedly) get whomped get it over and done with quickly so that things can stabilize and the rest of us can move on.

Like I said above too, I really do hope the ass-reamings that result from this result in restrained ways of doing business and a return to financial values that make sense (e.g. valuing savings over spending, investment over wanton consumption, long-term thinking over short, measured growth plans over riding the coattails of every "fly-by-night" scheme that comes down the pike, etc.) I know it's probably a longshot that this will ever happen (after all, nobody has done ANYTHING wrong here - it's all someone else's fault, right?) but I can hope. Maybe a good solid ass-kicking is what our society collectively needs. We've become very soft, lazy, fat and dumb. Our grandparents - survivors of the Great Depression and espousers of such intelligent and conservative approaches to money - would be disgusted and ashamed of what we've become today.

[dd74]

So, in a sense, no one is worth as much as they thought they were when the Dow was above 11,000. In short, more people will lose their homes, and/or declare bankruptcy, more businesses - large and small - will fail, and the dollar will continue to be worth less than the nothing it's worth now, because at this time, everyone has been working off a DOW that's two-thousand points overvalued.

I would ask, is the worst over, but no, I know I feel the worst has not yet arrived...

[tabs]

The overall market is not over valued. MOT for example is at $8.00 the breakup value of the company is around $18.00. Microsoft is around $26 and should be around $39 breakup value.

This is going to be an ugly week. AIG could very well go. My guess is that they are going to have to save it somehow?

Public Employee Pension Funds are now under risk.

The huge amount of cash on the sidelines is the saving grace. That money has to be put somewhere and bonds are not going to cut it.

As contrarian my guess is that collectables becomes the next hot bubble.

[Langers]

Originally Posted by tabs

The huge amount of cash on the sidelines is the saving grace. That money has to be put somewhere and bonds are not going to cut it.

Seriously... there are Arab oil families out there who could buy Lehman (well too late), Washington Mutual, Citi and others with their spare change. Just need to wait until they're cheap enough...

[911teo]

The problem is that there is a huge amount of toxic assets that nobody wants to have on their balance sheet and nobody knows/dares to value.

LEH went down because if even at zero it was not cheap enough (liability more than assets).

The decision from the Govt to let this one go without a guarantee should be welcome by the mkts. It's the only way to start the clean up process and consolidation of an industry that has to rethink itself.

The Dow at 10k, 9k, 11k? It does not make much difference. For the next 18-24 months there will be little cash avaliable for the banks. This means little investments, little growth.

I am not sure I would be as optimistic about the amount of cash sitting on the sidelines... unless you mean America will be taken over by the Middle East....

But look at oil? trading at $92 as I type... so even these cash rich arab fellows have lost 40% since July.... I am not sure they will be super willing on buying assets in trouble right now.

[911teo]

Originally Posted by Kurt V

Buy. I bet the market goes up 200-300 points tomorrow.

S&P futures indicate an opening 70-100 points below yday's close....

The Fed, their statement and the developments on AIG are the keys today and for the rest of the week.

[911teo]

Last observation....

Non collateralized loans traded at 12% on overnight maturities in London this morning.

That gives you an idea (when Fed Funds are at 2%) of the fear, uncertainties and unwillingness to take any risk that is dominating the mkts righ now....

[911teo]

AIG was downgraded last night. This has triggered a $13bn collateral call by its counterparties.

Yesterday GS and JPM had been asked to set up a $70bn line for AIG. We'll see if they can come up with something.

Goldman earnings announcements in 30 minutes. Pray they are good....

S&P futures trading down 1.10% from yday's close.

[Porsche-O-Phile]

Washington Mutual and AIG are done. Probably this week. If not, soon thereafter. The remaining big shoe to drop after that will be Citigroup. I would not be surprised to see them fail in the coming months/weeks either.

The "bottom" of this will come early next year when the ARM resets peak and when the 4Q numbers for this year come out. Virtually every retail stock is going to bomb (this holiday season is going to be lousy for retailers) so the markets will need to digest that. Once this happens and you've effectively seen the full effects of the housing market idiocy passed on to the retail/consumer markets will you begin to meaningfully be able to talk about any sort of REAL "bottom testing". Right now the only bottoms that are being tested are for individual companies on a case-by-case basis. Not sectors and certainly not the overall market/economy. That will come soon enough.

[red-beard]

It will be bad when my post count surpasses the DOW. I think that is the start of armeggedon