Dow drops below 11,000 for 1st time in 2 years

[brooklynite]

Source: AP

NEW YORK (AP) - Wall Street sank further into a bear market Friday as investors dumped stocks in response to troubles at mortgage companies Fannie Mae and Freddie Mac and oil's continuing climb into record territory. The Dow Jones industrials fell more than 200 points and slid below the 11,000 mark for the first time in two years.
Investors appeared unimpressed by a statement from Treasury Secretary Henry Paulson, who said the government's focus is ensuring that Fannie Mae and Freddie Mac remain as presently constituted to carry out their mission. Some investors had been hoping that the government would announce plans to take over one or both of the companies.

The government-chartered companies have fallen sharply in recent days on worries about their stability. Wall Street is worried that a collapse of the two financiers would cause further shock to the financial system, and trigger more losses to banks and brokerages with significant holdings of mortgage-backed securities.

The well-being of Fannie Mae and Freddie Mac is crucial because they hold or guarantee about $5 trillion worth of mortgages—roughly half the $9.5 trillion debt of the United States. Their troubles are just the latest depressing turn in a year-old credit crisis that shows no sign of ending, disappointing some stock traders who thought just months ago that the worst was perhaps over.

Read more: http://www.breitbart.com/article.php?id=D91ROS0O4&show_article=1

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No whining now...

[onehandle]

1. Four More Recessions! Four More Recessions! Four More Recessions! nt

[Neshanic]

2. Somebody is getting close to the target date. Not me. What do they win?

Can we get a post of the contest for the Stock Market?

[dweller]

32. play the Powerball

odds are about the same.

dp

[mikelgb]

3. it's all in your head

[Juan_de_la_Dem]

4. And stop whining

[CountAllVotes]

6. yeah, get off your toosh and go shoppping

now! :sarcasm:

:dem: :kick:

[aspergris]

5. I see the upside and downside

Bear markets are needed. Corrections are needed.

It's always been the case. Always will be.

Look at a log chart of the DJIA for the last century.

Those who jump in at the end of a bull market get #$(#$( if they don't use proper risk management, position sizing and discipline. Otoh, those who dollar cost average are rewarded with lower prices over the long time for their entries.

The economy is f*cked, don't get me wrong, but the great thing about bear markets is that much baby gets thrown out with bathwater. Iow, sentiment/emotion/panic opens up a LOT of value for investors who are willing to buy other's panic and desperation

Iow, buy when there is blood on the streets.

That's been true ALWAYS

It was true in 1929 for example.

The market has broken support and could have significantly more downside. The key is to search for value, strong balance sheets, and emotional overreactions

Often highly leveraged hedgies are FORCED to dump stuff to meet margin calls.

[ozone_man]

8. It may take 7 or 8 years before good buying opportunities arise.

This is a huge bubble and it's going to take a long time to unwind. Many Years. We'll get there one day.

[aspergris]

9. I've been selective

Last year (October), my portfolio was 30% long stocks, 20% short stocks (for an aggregate 10% long exposure), 20% long commodities (gold, oil and corn) and 30% cash.

I am adding some long exposure here and lightening up on commodities.

This is a great time for investment accounts because with the variety of ETF's available, there is easy access to asset classes like commodities (via DBA, DBC, GLD, USO, DUG etc.), shorts (DXD, QID), etc.

While it is not possible to directly short stocks in an IRA , you can go long a short fund, short futures, or use options.

[ozone_man]

12. Good time to own RYTPX.

Cash or short fund for the adventurous types. I think commodities are in a bubble and can't sustain their pricesmuch longer. zMaybe I'm wrong, but I think along with the equities deflating, the commodities are soon to follow.

I think at the top of the next retrace, whenever it occurs, would be good time to buy some more RYTPX. Call it dollar cost averaging. :)

[galileoreloaded]

19. Ummmmm No.

Here is the commodities problem. This is not about us any more. When we don't buy the boat full of rice or oil or whatever at the price asked, the boat just sails on by, to someone who will. See, and they have all our money because we gave it to them, so they can actually buy it. This has nothing to do with us anymore. Very important to realize this. We as Americans tend to think of things with an American perspective. The Chinese will put a welder on a roof welding in flip flops and a pair of sunglasses, we have OSHA, and so the same widget costs 3 times as much. We loose. Every scenario, we loose. Lost about 20 years ago.

[ozone_man]

22. Except that it's a global economy.

And the U.S. still has the biggest economy until China overtakes us in about 25 years.

The rest of the world is plugged into our economy, so when we sneeze, the rest of the world catches cold.

Look at European real estate starting to tank. The U.S. led the way. China depends on the U.S. economy as well as Japan. When we go into recession, so do they, and Japan never really recovered from the last recession/depression starting in 1990.

Commodity prices must drop along with real estate prices, the stock market, credit, and consumer spending. There will be no more dollars to chase the commodities, so the demand will have to drop off eventually. Unless chopper Ben Bernanke devalues the dollar some more, then who knows. Gold is still the best indicator of real money, but I think we'll see $600/oz. before we see $1,000/oz..

[aspergris]

30. Yes- Think asset class deflation

But there are always asset classes that are in strong bull markets, and others that are in strong bear markets. Many others are flopping around.

There are ways to make money in each. Buy pullbacks in a bull market. Sell strength in a bear market, and sell premium in a floppy market :)

That's grossly simplified of course.

I agree wholeheartedly that this is a commodity bubble

Gold is unique in that it HISTORICALLY (At least post gold standard) has been primarily an inflation hedge NOT a commodity play

With the globalization of the gold markets, gold has become MUCH more a commodity play (especially cause of India), which you are correct is showin' bubble signs

As for asset class deflation, I agree there can be and will be carryover when markets start popping their bubbles INTO other SUPPOSEDLY non-correlated or even inversely correlated markets because when capitulation/margin call selling happens it has carryover as hedgies etc. have to liquidate to meet margin calls

[Art_from_Ark]

34. Have you been paying attention to gold?

It's at $970/oz as I type-- only $30 away from the $1000 level, which, incidentally, it had reached earlier this year. Gold isn't going back to $600 anytime soon, for a number of reasons.

[aspergris]

21. two things

1) we are undeniably in a commodities bubble
2) nobody knows when it will pop

The way I deal with bubbles is sell my longs INTO strength and trail stop my core position.

I tend not to try to call tops, because more money has been eroded by traders trying to call tops than probably anything else - except maybe calling bottoms :)

I just try to modify my exposure to different asset classes, my overall delta (long vs. short) and buy premium when it is cheap, and sell it when it is expensive

[ozone_man]

24. Nobody knows when the commodities will pop.

But I wouldn't go long on them at this point. I think gold is probably coming down from a top. Oil, is less predicable, but it too will have to follow, maybe not until Obama gets into office, assuming that he doesn't start a war with Iran or Venezuela.

I'd rather stick with safer things like shorting the S&P500. The little ups and downs are of little consequence to me. The trend is what I care about and we're a long way from bottom. Years.

[aspergris]

26. of course not

the time to go CORE long was when everybody hated them

I started buying gold in 1998.

I don't chase

Like I said. I sell into STRENGTH.

And trail stops on my core.

I do like to trade dow futures. I don't like the S&P futures because the spread sucks, and frankly they are tick-fucked to death by arcade traders. Makes it jumpy.

But I will swing trade SPY

[chelsea0011]

7. S**t!!!!!!!! And to think I could of had all my SS tied up in the market

if only we listened to Bush and now McCain.:sarcasm:

[WriteDown]

13. The market still makes large gains...

over any 11 year period. This is a needed correction, but in the long run, a diversified fund in the market will make a considerable amount of money. Don't get me wrong, I am not for putting ss money into individual stocks, but an index fund and an actual barrier to putting the funds into the Congress' general fund is probably a good idea.

[NeoConsSuck]

14. The S&P is the market

and it is lower today than the day * took office.

I think there will be money to made in the market within a few years, but sadly, it won't be in American markets. Although I'm getting bloodied in my emerging market ETFs, I'll stick with them for the long term. And I always stay 25% commodities.

[WriteDown]

15. doesn't matter

this is just one dip. still trending higher over an 11 year period.

http://www.nyse.tv/djia-chart-history.htm

[wishlist]

16. The conversion costs to privatize SS are astronomical and fees will eat up profits

The changeover costs of revamping the very successful SS program would be huge and the private financial firms will be the only ones getting a bonanza from their fees. Social Sec is the only govt program to ever run such a huge surplus. Just because the surplus is IOU's on paper (as are all paper investments) does not diminish the fact that it is running a huge surplus for years to come and has been an invaluable insurance asset to millions. Trying to defend the 'gains' and profitability of the stock markets is dubious in light of their performance during the past 8 years. The govt would end up bailing out or having to provide welfare assistance to those who gamble and lose their Social Security accounts.

There are plenty of opportunities for people to do whatever risky investments they choose in a variety of tax advantaged 401k and IRA type accounts. Seems like attempts to put SS contributions in the markets are a last ditch effort to shore up a shaky stock market and at the same time a big windfall for the financial sector who will rake in billions in handling costs and fees if SS is privatized. It has always been run very efficiently with very few employees considering the number of Social Sec recipients, in fact it has been understaffed especially under Bush, while there has been a deliberate PR campaign to turn the public against Social Security.

I have done much better under safe insured CD's and Savings Bonds over the past decade than my brother who has been in stock funds. I could take early retirement though he is older but may not be able to retire anytime soon between what has happened in the markets plus his company downsizing and eliminating health insurance plans for retirees.

[WriteDown]

17. What is the ROI

on SS?

[chelsea0011]

27. However, if I were retiring today my portfolio would be taking a beating

and couple that with the fact I am withdrawing money I will have less in my portfolio while I wait for the market to switch around.I've lost a lot of money if I retired a couple of months ago.The last thing a retiree needs is a down stock market when they retire.

[WriteDown]

33. Very true....

Can't argue with that. Always want to cash out when the market is high.

[truthisfreedom]

10. The repugnants are paralyzed with fear by this news. They have no hope whatsoever this fall.

It's over.

The stock market is going to end up lower than before bush took office. America will be wrecked, run off the road by bad policies and lack of regulation. Led by an idiot at the helm, who destroyed every business he touched before he was erected into office, who was only saved by "buyouts" when his businesses didn't simply flop and fail (as he did insider trading to steal what was left of them.)

EVERYTHING we predicted about bush came true. EVERYTHING.

[Thor_MN]

18. Thinking of hanging out near the convention this fall with a sign

"This the DOW on DFL" (DemFarmLabor to non-Minnesotans)
"This is the DOW on GOP"
"Any Questions?"

[paparush]

23. But. but but. that other guy is an elitist black muslim...

who doesn't wear a flag pin and has an uppity wife

:sarcasm:
(tag applied lest someone miss the subtle irony)

[hack89]

11. Good - some real bargins out there, nt

[Doctor_J]

20. the fundamentals are sound

who are you going to trust - the first MBA Resident or your lyin' eyes?

[daleo]

25. 500 point gain (approx 4%) in nearly eight years of Bush

That's about .5 percent per year. After accounting for inflation and the drop of the U.S. dollar, Bush has managed to destroy an enormous amount of wealth. I think the country must be at least 25% poorer than it was in the year 2000.

[LiberalFighter]

28. [Jan 19, 2001] 10,587.59 - - - - - [July 11, 2008] 11,100.54

Bush has been such a good President for our economy.

Clinton
3,241.95 -- Closing on Jan 20, 1993
10,587.59 -- Closing on Jan 19, 2001

Bush 41
2,235.36 -- Closing on Jan 20, 1989
3,241.95 -- Closing on Jan 20, 1993


WOW... Bush 41 did twice as better than his son who needed 8 years to do half as good as his daddy's 4 years.

[daleo]

29. The younger Bush really has been an all around failure

It's almost breath-taking, how awful he has been. Two quagmire wars, a huge increase in the deficit, a stagnant stock market, the housing collapse, the New Orleans disaster, no progress on greenhouse gas emmissions...it's a staggering record of incompetence.

If Barbara Tuchman were alive, he would get his own chapter in a revised edition of "March of Folly".

[dysfunctional press]

35. it's not over yet- he's still got 6 months at the helm...

and it's going to be a very, VERY, VERY bad christmas for retailers.

[roamer65]

31. Just wait until Monday morning with the IndyMac failure.

I expect we'll drop well below 11,000 then.

Gold should do really well.:party: