It just feels like something needs to pop in the equity averages. The moves that we've been seeing in commodities, currencies, metals, energy, and individual stocks are mind-boggling. Look at the British Pound (to site one example, there are a dozen others). It drops 25 big numbers in a straight line over the course of a few weeks. On Friday, it was up 4 big numbers. FOUR!!! in one day. Now LEH is going going gone. AIG is next and then Merril. If these guys are in trouble, why not GE, which is basically a bank dressed up as an industrial company. I think a 2000 point move in the DOW is a chip shot given what we've been seeing.
I would agree that the market has not yet fully discounted the events occurring these past few months. I can't think of a time during my life when the financial upheaval has been any greater than it is right now. (I wasn't alive during the Great Depression.) It seems that it's the confluence of economic turmoil in two aspects of the US economy that has made this way more than a hiccup in business as usual. One is, of course, the almost unprecedented lowering of interest rates at precisely the wrong time during the last Greenspan Years. This led to an economy on crack, so to speak, and a weakened dollar. This, and securitization of mortgage loans, which disconnected the lender from the borrower, combined with extraordinary inattention to risk, has led to a monumental credit crisis. But the US economy is robust and could have handled these problems far more readily had they not occurred at the same time that the US was fighting a war entirely with borrowed money. (I think this itself is unprecedented in US history with the possible exception of the Revolutionary war.) The political necessity of monetizing ever more increasing debt from an on-going war combined with a weak dollar has led to inflation that far exceeds the government's doctored numbers. The Fed is charged with both fighting inflation and assuring liquidity in credit markets. The combination of a severe credit crisis and unacceptable inflation has made their job exceedingly difficult. It is a wonder to me that they have done as well as they have so far. Should we take still another 10% out the stock market before bottoming, i will not be at all surprised, in fact i'm expecting it. I wouldn't want to predict when we will hit bottom, but my jaded view of American politics makes me think it won't be until after the election.
markets crash when no one is expecting them to, if everyone is expecting a crash tommorrow than it aint gonna happen, if everyone is expecting the market to go lower than we will continue this sidewaysishdownwards movement we have been seeing the past 6 months.
I feel the same way. I think there are too many shorts. They get short squeezed easily if there is no real selling going on. Once shorts disappear, then everybody will feel: wow I guess nobody is shorting anymore, so no more crash, and then the real crash would happen.
Now LEH is going going gone. AIG is next and then Merril. If these guys are in trouble, why not GE, which is basically a bank dressed up as an industrial company. I agree about GE. I have never really liked this company. I am sure my uncle is glad to hear me say this, he was an aircraft engine designer for 20 years(Around not exact) However, they won't be going anywhere, they are too diversified. Way too many unrelated business units. But ONLY(haha) a third of their revenue comes from financials.
That's kind of an old wive's tale. Plenty of folks were talking about a crash and a major financial crisis in 87 and 29 and plenty were short. We're already in the major financial crisis. One scenario is that the market knows the news and is fine with it. The other is that one morning folks will wake up, say I can't take this slow erosion of equity everyday, and just say "Sell".