That is a snapshot from the close on Thursday, wow those are some small numbers. The market caps respectively are $105 billion, $19.7 billion and $13.6 billion. I'm surprised GE is still that big and kind of surprised that BAC and C are that small. Obviously BAC and C were mega cap stocks not too long ago.Not that this is a newsflash but these numbers are a reminder of how FUBAR the stock market is these days and it may be a while before things get back on track. While I was struck by a lack of (relative) negative sentiment the other day in the 4.5% drop and yesterday's action didn't seem to cause panic exactly it feels like the anxiety ratcheted up some.
From 30,000 feet it is fascinating how long this has been going on and how fast the decline was (38% in just one year is huge) and understandably people are very worried. If the SPX going to 600 crowd ends up being right that will scare a lot more people but at 778 the market is down 50% from its peak. Another 178 points from here is 22% more (11% as measured from 1565) so in that light we have already endured the worst in terms of numbers. I imagine that another 178 points from here would be worse in terms of fear created. I don't know about you I think these numbers are important.
42 comments:
I'm taking just a bit of solace in the fact that the market declines are being driven primarily by the financials. The Bespoke guys had a couple of good posts recently showing that the average stock is doing much better (that's relative) than the indexes would imply. Emotions are driven by the headline numbers for sure, but I'm trying hard to stay rational as my port just bumps along...too late to sell and too early to buy.
Been thinking the same thing. We're more than half way to the bottom. Isn't great to be an optimist?
I'm hoping that this economic dislocation brings some manufacturing back to the United States. This country needs to start making more products with real, tangible value. Not promoting protectionism for sure.
Anon 6:34, take comfort in the fact you are not alone. I have not sold anything and having been buying equities with earnings from current holdings. If history repeats itself, it will be a satisfactory move. If history doesn't repeat itself, it won't really matter. The best move I made was having a sensible asset allocation to begin with.
If we see a SPX 600, count on a few soviergn defaults, currency runs and as Roger said, increased fear and panic. Throw in C, BOA and other global banks failing and you get more free fall, which adds to more fear, panic, currenct runs, etc. World leaders are incompetent/corrupt to the degree they f$ck things up during good times. If the bottom drops, their initial responses will be horrible for some time.
6:39: Do not hold your breath about manufacturing coming back to the US. The reality is the rest of the world is willing to work harder for less pay and benefits than we are in the US. Manufacturing is their opportunty to build a middle class like the US has over the last 50 years. We in the US should be focused on getting the right education so we can move up the food chain to higher value jobs (software, complex manufacturing, etc.). The sooner we realise this and refocus the better.
roger - not to go back to the Santelli Chicago Tea Party comments from yesterday but I think this plan is really hitting a nerve with average americans. Here's my idea (and I am serious about this)...I think someone should start a boycott where on a specific date, everyone should not paying their mortgage. It doesn't matter if you can afford it or not, just stop paying. This would send a clear message that ordinary, hard working Americans who are responsible (which despite the media reports are most of us) will not stand for bailouts of deadbeats and morons who couldn't understand that their $30K a year salaries couldn't cover a $500K mortgage.
I am absolutely serious about this idea. If enough people were behind it, what could the banks do? Foreclose on everyone?
Ever read that book tipping point? All it takes is one idea and a lot of momentum
No offense, but I'm sure some will be taken, but the average American is apparently stupid then. Obama is doing exactly what he said he was going to do. He was going to "spread the wealth". With a majority in congress, we all knew his bills would breeze right through. So we got the government we deserved, apparently. Why are we getting mad now? Should've been mad in November and points before.
Back to the numbers, this is sooo reminiscent of the dot bomb days. I can remember everyone looking at Lucent when it was below a buck. We all couldn't believe where they were after where they had been. That was about the days of the bottom ... Octoberish 2002. I'm not saying we're done doing down appreciably, but this is deja vu all over again. This time, financials.
Roger, why do you suppose that GE doesn't take some steps to somehow quarantine GE Capital, like GM did with GMAC? I'm a long way from an investment banker, but it seems to me that they've got some healthy businesses (unlike GM) that are being held hostage by the financial woes of GE Capital and they're not being very proactive in addressing the issue. Maybe some kind of spin-off with a majority investment from a hedge fund instead of money from Buffett?
bill b - obama ran on a platform of helping 95% of americans. The new mortgage bill will help less then 5% and is truly aimed at deadbeats.
I hear you that people should have known what they were getting themselves into. Just for the record, I saw right thru his 95% promise and voted for mccain. but that is what he ran on
6:56 Agreed. Seems like many of the brightest in the U.S. are majoring in financial or legal engineering. As an engineering major myself (Go Boilers!) from mid-80s, many >60% of grad students were from outside the U.S. I wonder if things have changed? Locallly, most of the M.D.s around here have Indian surnames and speak with an accent. Unfortunately, the rewards for some of the most demanding formal educations have been way less than those in the financial arena. Maybe things will change.
anon: I understand. So long as most Americans have their hands out, we'll always elect socialists because people will believe they're getting something for nothing. We punish hard work and responsible behavior. Until that attitude changes, we'll continue to get swindled.
Want to hear something painful? I own C at 22.50. :)
bill b - i hear ya, the country is changing, that's for sure.
C at 22.50.....I can almost match that, I bought UYG at 7.69. the way things are going with the banks it looks like we'll both own a piece of the us gov't in another week or so :)
Electing socialists? Come on.
Roubini et. all are saying we need stimulus. Massive stimulus. Did you think a large group of politicians, regardless of party, would come up wtih something more intelligent than this?
Do you think a majority of these politicians understand the issues better than you do?
It is what it is. Frankly, I'd like to figure out a way to tax 100% of the bonuses John Thain handed out.
Anonymous 7:00
A mortgage strike?
"I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part." - Otter, Animal House
fboness -
mortgage strike - yes, absolutely
I know the idea is radical, but sometimes enough is enough
"Frankly, I'd like to figure out a way to tax 100% of the bonuses John Thain handed out"
tax and spend, how's that working for historically democratic states?
1. That phrase has no real meaning except to point to the talk of certain political personalites. I'm not sure I could come up with a successful nation/economy/empire that did not tax profits and spend money.
2. i'd like to get back some of the money we've given to BoA et. all. I'm not really sure how to do that without going after the idiots that got their companies into this mess for at least part of it.
I think all this is sort of comical is some ways. Middle class America will see what they got in Obama over the next couple of years. Think of all the boomers who worked their entire lives, paid down their mortgage, etc who will not be able to retire because their savings have been devastated. Now they are being asked to pay more to keep irresponsible people in homes they can’t afford. Gotta love it…..people are getting exactly what they elected
as i opined here frequently in 2007 the whole country is one big giant case of sub-prime borrowing. no reason to think that the country overall will fair better than the individual sub-prime borrowers.
we spend what we do not have.
I find it utterly amusing that the same people who did not whisper a breath when the republicans were busily concentrating the "paper" wealth of the nation in the hands of the few are now upset that the democrats are spreading the "paper" wealth of the nation to the hands of the many.
born - allowing people who create businesses, run businesses, etc allows job to be created and wealth to trickle down. spreading "wealth" to deadbeats who will default in the end anyway is just plain idiotic
very true...
that's why when the republicans pretty much shut down all funding to the SBA and worked feverishly to manipulate SEC rules so that a handful of investment banks can rape the nation we ended up concentrating the "paper" wealth of the nation in the hands of the few.
I am all for free market capitalism. Only ideologues view the past 8 years or the next 8 years as anything remotely related to free market capitalism.
The technical structure of the equity markets is becoming increasingly chaotic but volume and volatility are not telling the whole story: The divergences are more reminiscent of the feeble thrashing of a drowning swimmer; either the swimmer's hand will encounter something buoyant that it can seize and rise to or the final drop into the depths begins.
Could we be headed for a double bottom? Man, I don't know, but a market this oversold should have initiated some kind of rally so I'm paying very close attention. I enjoy self-righteous moralizing and bashing brown/immigrant/welfare-types supported by pinko/socialist/liberals and my taxes as much as the next red-blooded American jackass but I'm really busy and cursing the grass for being crushed by elephants just seems like a total waste of time. On a par with trying to explain to tyros why supporting the underlying assets of derivatives may be considerably more cost effective than supporting the derivatives themselves.
Okay, enough fooling around, back to the game: I'm rolling SKF, SDS, GLD and am on the verge of adding more long F (have you seen the reviews of the Fusion? Now that's a hybrid that will get some market share when oil inevitably rises again).
...and to think I was really happy for all the first time homeowners.
Maybe people should have to take
a homebuyers test...kind of like
a driving test, before purchasing a home.
I just have a hard time believing
that the so called best and brightest didn't know this would happen all along...sorry.
How many compact new Las Vegas
homes could we fit on an aircraft
carrier? Instant jobs...get them
to the left coast. Some of the
"ghost suburbs" could be rezoned
art/business colonies...live where
you work...
Thankfully my timing model has done a good job of insulating my portfolio against this bear market, but now, for the first time, I'm getting worried about the specter of inflation and possible default of the debt in the coming years.
I pretty muched stopped doing market research a few years ago, but now I feel like I have to start over again working on a model to help me determine a strategy to protect myself against a once in a century calamity. This recession isn't the calamity imo.
We are in the midst of totally uncharted waters. Predictions cannot work at this point and are irrelavent. As I mentioned a few weeks ago, we can drift down to 3000 on the DOW over the next few years, or we may not.
What this era really brings to the forefront.....is that our leaders in business and politics are not really as smart as we thought. Or maybe they are living the American dream, and gathering as many acorns for themselves as possible.
I think this may be the time to exit the market for good and protect what little is left. How can the US ever expand again with debt levels that can NEVER be paid.
Concerning "stop paying mortgages". The banks would go after the 1st 10% and I would be one of the 10%.
Why doesn't the government offer 3% mortgages for everyone?
My goal in life is to see that all of the unethical, lying CEO's and their respective boards end up in extreme poverty. If the socialists help me, so be it.
What I see on these boards is a bunch of smug folks who think their hands are clean of the excesses of the real estate/credit bubble - what a bunch of nonsense
Who got the money that the banks are unlikely to get back - EVERYONE - at least everyone that made, sold, serviced, worked, or hired anything in the past.
Sorry bubs, but everyones paycheck and business was pumped up by the merry go round, so the fact that we all pay is hardly unfair.
A fractional banking system always has a stability limit, in a big enough pull back - it fails - and it is all of our problems, not just the folks left holding when the music stops...the guy that gets out of a ponzi scheme the day before it folds is not "innocent"
YMMV
first commenter said: "The Bespoke guys had a couple of good posts recently showing that the average stock is doing much better (that's relative) than the indexes would imply"
I don't see that. The 401k choices at my work and their performance since July:
1) DSPIX -48%
2) RGAFX -47%
3) MEIHX -47%
4) FBSAX -57%
5) MFGHX +5.7% (but they are bonds and the 401k advisers warned us we were too young to think about bonds)
There are a lot of frowny faces about and I don't think they feel they have missed the worst of it.
oh, and the commenter two previous is full of it. Taking money for a service or a good is NOT the same as speculating, and it was speculating that brought this down on us. Don't try and make some sort of moral equivalence. There isn't one. That is like saying because thieves use money and non-thieves accept money we are all thieves. It simply isn't true.
YMMV - with all due respect, you're an idiot. I bought a home that I could afford with a fixed rate mortgage. I have no other debt to my name besides my mortgage. Remind me how I benefited from this?
You must be one of the "ones" benefiting from Obama's plan?
LOL, as I said, everybody has clean hands, but the "other guy".
As a matter of fact, I have no mortgage debt at all - but I am not so blind as to believe that that the trillions of $$ now lost did not do me some good as well - better car sales, big TVs, retail of all kinds, tax receipts for my town and state, construction businesses - EVERY business (and gov.)did better from the grease the bubble pumped out.
Sure some got "more", but the vast majority got "some".
YMMV
ps. the last bubble I don't see how it stays inflated is college ed tuition - 20-40k per year without HELOCs to tap ???? hmmmmm.
YMMV,
I agree with what the above two posters said to you. Obviously, the "money" from these deals worked their way through the entire economy. But that does not make all of us guilty of the speculations that went on. If some people were stupid enough to buy a $500,000 house on a $50,000 salary, why should we bail them out? I don't mind helping those in need, but I do mind rewarding bad behavior. And that applies to the bank and auto industry CEO's as well.
Roger, any thoughts about investing in a fund, i.e., Pimco's PSSDX that holds interest-paying bonds and uses derivatives to short the S & P index as a hedge?
Anonymous, you saw right through Obama with his promise to help 95% and voted for John "Fundamentals of our economy are strong" McCain. That's hilarious.
Anonymous - "allowing people who create businesses, run businesses, etc allows job to be created and wealth to trickle down."
Except that these people didn't create jobs here, they moved them offshore to increase profits. Workers here lost their jobs in record numbers. In the last eight years, we've seen a massive transfer of wealth upwards to the very few. I've heard that theory about "trickle down," it's in the same ballpark as unicorns.
You're being too kind Helena: Trickle down is not in the same ballpark as unicorns, it's in the same ballpark as urinals; that;s what trickle down really refers to.
Sorry to be offtopic roger.. hope you would be ok.
It is all due to Barry Ritholtz and he even acknowledges it. Let us get the pitchforks & torches ready!
http://www.ritholtz.com/blog/2009/02/my-bad/
helena - "they moved them offshore to increase profits. Workers here lost their jobs in record numbers."
you ain't seen nothing yet....you think raising taxes on businesses in the us will reverse this. ha, now that's in the same ballpark as unicorns
all in favor of turning sub prime
into 100 year mortgages...
vote here:-)
or rent with an option to buy
back in the future....the
children will not be damaged...
stability.
or rent with an option to buy
back in the future....the
children will not be damaged...
stability.
"you think raising taxes on businesses in the us will reverse this..."
Anonymous, you digress. The fiction that lowering taxes on business results in domestic job creation has been refuted by the massive off shoring of jobs. Bush's tax cuts benefited predominantly big business and the uber wealthy. But he created only a net three million jobs in eight years, the fewest of any president since 1939 when the Labor Dept. began tracking these figures.
Anonymous @ 11:04 p.m.
lol - Exactly...
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