Stock Market Update -Oct 5th

We got the $700 billion bailout plan approved, and the DOW dropped 500 points the day it was approved! So much for the government trying to manipulate the markets. Remember, on Monday the DOW dropped 777 points when the plan was first rejected, and all the media talking heads and all the financial 'experts' and our elected officials then got on television and insisted that we must have this plan in order to save the markets (incidentally, the amount went from $700b to $850b as the politicians added their own goodies to it). The media reports that the politicians heard from their constituents 9:1 against supporting the bailout, but the politicians voted for it anyway -so much for representation. Now the 'experts' are saying we need an interest rate cut.

Also of note this week, the national debt crossed the whopping $10 trillion level (see debt clock on the left). I've been monitoring that debt clock for several years and I've never seen it change at such a high rate. Keep your eye on this future crisis.

It seems like everything is being sold off, not just the financial companies (the short selling 'ban' was extended for another week). Even some of the mighty tech stocks like Apple, Google, RIMM, and IBM are being sold. Even commodities -look at the chart below (crude oil closed below $100 again). Adding to the bad news was a huge drop in jobs as reported on Friday -that makes it 9 months in a row for job losses. I'd stay out of the way as this bear market continues its course.

(click to enlarge)

Next week we can expect more volatility as the new earnings reporting season begins. I don't expect we will be getting much good news here, so we could be in for a rough October.

If you are not protecting or hedging your portfolio, you have probably lost over 25% in the past year. If you believe in the 'buy & hold' and 'long term' nonsense that the so-called experts preach, you haven't made a dime in the markets in the past 10 years (chart below). Zero return in 10 years -I don't call that investing. The same 'experts' say you cant time the markets, but in fact it's very easy to look at a long term chart to see when the long term trend changes direction. It changed late last year.

News stories:
For bailout to work, housing market needs to mend (what I've been saying all along)
The Housing Bubble and the Massive Rewriting of History
Fed Pumps Further $630 Billion Into Financial System
The Fed Has Made the Entire U.S. a Hedge Fund - Get Your Portfolio Ready
How the short-selling ban could backfire on the banks
Goldman is getting the best of the credit crisis

Jobs: Worst in 5 years
U.S. Payrolls Fell by 159,000; Jobless Rate at 6.1%
California May Ask U.S. for Loan
Europeans scramble to save failing banks
Financial avalanche hits Iceland amid credit crisis
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Sep 28th

More of the same this week as the world awaits the final details and the vote on the $700,000,000,000 bailout plan. Of course the 'plan' does little to address the underlying problem of foreclosures on overpriced properties!

Lost in all the news was the shutdown of Washington Mutual -the biggest bank failure in US history with $300 billion in assets. The 2nd largest failure was Continental Illinois in 1984 with assets of $40 billion, caused by, guess what -a housing crisis! Also Warren Buffet bought into Goldman Sachs with a $5 billion investment, while Mitsubishi bought 20% of Morgan Stanley. The ailing (or is it 'failing') auto industry also got some handouts from the government this week.

(click to enlarge)

Next week we get the final details and a vote on the 'plan', along with the market reaction. It's anyone's guess at this point as to how the market will react. The market will also react to the monthly jobs number on Friday -we have lost jobs 8 months in a row so far. Until this market settles down, be very careful! Also, the short selling ban should be lifted next Thursday. Interesting info -the last time short selling was banned was in 1929.

WaMu becomes biggest bank to fail in US history
Washington Mutual Bond Holders Wiped Out
What $700B won't buy: a quick fix for the economy
The Deal's Getting Done, But Will It Work?
China banks told to halt lending to US banks-SCMP
Morgan Stanley to sell Mitsubishi 20 percent stake
Citigroup, Wells Fargo bid for Wachovia-NY Times
Buffett to Invest $5 Billion in Goldman

Government Approves $25B Low Cost Loan Package for Auto Industry
US Mint suspends sale of 24-karat gold coins
New home sales fall to 17-year low
Lennar calls for government help for U.S. builders

Bank run prompts $500M infusion in Hong Kong
European Regulators Move Swiftly to Rescue Two Lenders
Bradford & Bingley Nationalised Another UK Bank Wiped Out by Tulip Backed Securities
Credit crunch banker leaps to his death in front of express train
Financial crisis: Fortis to become latest victim of bank crisis

On the lighter side...
Toilet-paper researchers create 3-ply tissue (pic)
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Sep 21st

Wow! What a week -DOW down 500, down 450, up 400, up 400 again. The financial markets are in turmoil. The Lehman bankruptcy, the government takeover of AIG with an $85 billion bailout, talk of Morgan Stanley and Goldman Sachs scrambling for survival options, Money Market Fund losses, and a massive $700 billion government bailout plan to be worked out over the weekend is keeping the market on edge. The Fed also made available an additional $180 billion to overseas banks.


'Short' sales were banned on most banks & brokers this week to stop their stock prices from going down! You would think that bank & broker shares would take off, and they did overnight, but then they all sold off on Friday -hmmm. So much for the 'shorts' causing the shares to fall -no more shorting allowed now, but they still fall. The same thing happened before with Fannie & Freddie. In spite of a ban on short sales, their stock prices still went down and the government eventually had to take them over (maybe it wasn't short selling causing the shares to drop after all, but rather something more fundamental -like being bankrupt!)

Also of note, AIG was kicked out of the DOW and replaced by Kraft Foods (K), another bank shutdown was announced on Friday, and investors are now also concerned about the safety of Money Market Funds. Lastly, Russia closed their markets to prevent them from dropping further! In the midst of all the turmoil, Gold rose over $150, along with most of the gold and silver stocks.

Next week we should get a resolution from Congress on the $700 billion bailout plan (save the bankers, let the homeowners fend for themselves)! Where will all this money come from -well, the government just prints some more! Part of the bailout plan includes raising the debt ceiling to $11.3B (see the debt clock at the top left side of this post). Seems like we keep having to raise our credit limit every year. It should be an interesting week!

BTW, in spite of all the turmoil, last week was my best trading week, thanks to the volatility and the run up in Gold. Professional traders can be profitable in any market...

Financial Crisis Enters New Phase
Stunning Fall for Main Street’s Brokerage Firm
U.S. stock indexes plummet as Lehman goes under
Government announces $85 billion loan to save AIG
U.S. Drafts Sweeping Plan to Fight Crisis
Citing Grave Financial Threats, Officials Ready Massive Rescue
Rescue plan seeks $700B to buy bad mortgages
Central banks flood credit markets with liquidity
Why did the Fed provide $180B to overseas banks?

Money market breaks the buck, freezes redemptions
Money funds see record $90 billion one-day drop
Rattled Russia orders markets to stay closed
FDIC Won't Run Out of Money, But WaMu May Be Toast
The worst is yet to come
How Financial Madness Overtook Wall Street
Gold posts record gain
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Sep 14th

The market recovered some of the losses from the prior week with a big pop on Monday following the Fannie/Freddie takeover news, but concerns in the financial sector still linger (Lehman, Washington Mutual, AIG, Merrill Lynch, all had big sell-offs this week).

Commodities also continue to sell off, though we did get a small pop on Friday. Oil sold off in spite of a big hurricane heading toward Texas on Friday. The recent US Dollar rally may be slowing down at this level though, and you could start to see Oil and Gold slow the recent freefall!

Meanwhile Johnson & Johnson, McDonalds, and Walmart (DOW components) have been strong throughout this bear market. The Financials have been the main laggards in the DOW.


Next week could be an action packed week with more volatility. We have a Fed meeting on Tuesday, earnings from some of the big brokers, and the Consumer Price Index. All eyes are also on Lehman and some of the banks mentioned above. The end of the week also marks expiration on Options, Futures, etc.

Based on the price charts above, market direction is uncertain from here so continue to use caution.

*** Breaking news ***
Bank of America to Buy Merrill Lynch for $44 Billion
Stunning Fall for Main Street’s Brokerage Firm
Lehman Prepares for Bankruptcy

News stories:
Stocks struggle on bank woes
Meltdown at Frannie, Lehman...Who's Next?
The endgame is near for Lehman

AIG in freefall
WaMu outlook weak but soothes some investors
Feds lower BankUnited’s capitalization rating
Merrill Lynch shares catch Lehman bug
Crisis Mode: Financial Sector In Dire Trouble
U.S. Gives Banks Urgent Warning to Solve Crisis
U.S. Foreclosures Hit Record in August as Housing Prices Fell
Trade deficit surged to 16-month high in July

Freddie, Fannie Scam Hidden in Broad Daylight: Jonathan Weil
Feds bailed out China, not the US
A $10 Trillion Problem
Bloomberg Video -Roubini Says U.S. at Start of `Very Severe' Bank Crisis
SPDR GLD ETF Unloads 79 Tons of Gold - Should Investors Follow Suit?
Global Equity Market Returns
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.

Stock Market Update -Sep 7th

The market dropped sharply on Thursday after disappointing jobs numbers, followed on Friday by a 6.1% unemployment rate announcement. This is the 8th month in a row with a drop in employment figures. The S&P 500 is now back to where it was about 3 years ago -so much for the buy and hold strategy! The better strategy is to always close or hedge your positions when the trend reverses...

Yet another bank shut-down was announced on Friday. Meanwhile there is talk of a government bailout to be announced this weekend for battered and bruised Fannie & Freddie.

(click here for a longer term look at the US Dollar)

Next week we could see more volatility in the markets. As I mentioned last week, historically we see selloffs in September (and October) -so far its proving to be true again. In spite of the recent Dollar rally, there is an overwhelming amount of bad news out there, so be careful (mortgage defaults, unemployment, credit market lockup, global slowdown, etc...)

Overseas markets have been selling off as well. Commodities also continue to sell off. We could see Gold hitting 650-700.

Breaking news:
Fannie Mae, Freddie Mac Taken Over by U.S. Government to Prevent Collapse

This Stock Rally Is Over And Here’s Why
Unemployment rate unexpectedly soars to 6.1%
Fannie And Freddie: Massive Fraud Breakdown
U.S. Rescue Seen at Hand for 2 Mortgage Giants
U.S. Mortgage Foreclosures, Delinquencies Reach Highs
9% Of All Mortgages In Default/Foreclosure
Florida Real Estate Bottom Signaled by Sale of Distressed Condo
Goldman tells clients to sell Merrill shares

Dollar Advances to Seven-Month High Against Euro as Oil Slides
Gold falls for fifth session on oil; down $32 in week
Firestorm Erupts Over U.S. Banks' Gold, Silver Shorting
Big commodities hedge fund shuts down
The $64 Trillion Question: What's the Dollar Really Worth?
Main Bank of China Is in Need of Capital
How China's Bet on US Paper Went Wrong
Russian assets tumble amid worries about ruble