Dow’s 500-pt. drop: Harbinger of doom or temporary setback?
My e-mail inbox lit up on Sunday with breaking news alerts about the craziness on Wall Street. First, the sale of Merrill Lynch to Bank of America. Then Lehman Brothers declaring bankruptcy. Today, the news broadcasts can’t get enough of it and it’ll be a front-page story in the Post-Dispatch for two days running.
To be sure, it’s huge news, stemming from the meltdown of the capital markets as a result of investments in mortgage-backed securites. A few paragraphs from the story:
The swift developments that took place Sunday are the biggest yet in the 14-month-old credit crisis that stems from now toxic subprime mortgage debt.
For the first part of Monday’s trading, the market was falling, but in a largely orderly fashion as investors seemed to draw some relief from the resolution of Lehman’s problems. As the session wore on, and there was no word about AIG, the market suffered another bout of fear that the credit crisis will continue to devastate the financial sector. Selling accelerated in the final hour and then took on more momentum as stock indexes broke through lows set in July - an ominous sign for some traders.
The swift developments that took place Sunday are the biggest yet in the 14-month-old credit crisis that stems from now toxic subprime mortgage debt.
For the first part of Monday’s trading, the market was falling, but in a largely orderly fashion as investors seemed to draw some relief from the resolution of Lehman’s problems. As the session wore on, and there was no word about AIG, the market suffered another bout of fear that the credit crisis will continue to devastate the financial sector. Selling accelerated in the final hour and then took on more momentum as stock indexes broke through lows set in July - an ominous sign for some traders.
This is what also struck me as interesting: In spite of a drop in the Dow’s drop of 504 points (4.42 percent), it only brought the index back to its levels of mid-July.
So, is the Dow’s drop a big deal? Does it signal a reason to worry, or will this too pass? If so, how soon?
Kurt is the director of social media for the Post-Dispatch, where he has worked since August 2002. He's been a journalist since 1982, covering municipal government, courts, education and two hurricanes as a reporter before becoming an editor. 
This is not new news. I have posted months ago on this blog about the financial issues about to explode. I got most of my info from a conservative who served in the Reagan administration before the conservatives on here start a posting about liberal drivel. We haven’t seen anything yet. Wait until the foreign countries call in all the bad paper wall streeters sold them. The worst anti-american terrorists worked in the towers folks. And Bush kept quiet while his man McCain voted with him 95% of the time. While they handed their buds ill-gotten gains. Year after year. Lenders were allowed to foreclose on debt they couldn’t even prove they owned.
You all better hope there are enough folks who vote REAL change this year, or your kids have no chance. They have not been trained to live in a hard world. I am a bit upset at the press on TV tonight who are admitting they are carefully choosing their words so as not to upset the sheeples, yet who were either ignorant of, or sitting on this old news. Goos luck to all who deserve better. Pox on the houses of those who stole this country’s future and screwed the rest of the world’s financial backers of a country with unprecedented debt and stupidity!
Another bad sign is the secondary capital market is tightening up their purchases of private debt. One of the largest, Bayview, has decided to only buy portfolioed notes to mitigate their risk. So if you take back a mortgage on a house you sell you have many fewer outlets to sell that mortgage if you need sudden cash. Once the predatory lenders have no cash to lend we will see the worst of it. Until then many we go to war with OWN us capital wise. Let’s hope they will be kinder to us than we have been to them and don’t call the many notes due, nor make us explain why the paper isn’t as it was when sold.
On the bright side, Karl Rove admitted today McCain lied in his ads against Obama and change. Will wonders never cease? Who dropped the acid in the already drug-ridden water supply? You couldn’t write a movie like this! Now somebody explain why electing a republican who slept while this blatant thievery went on should be in office again. Ya all need to quit focusing on lying about Obama’s religion and get your crap together and do some research instead of watching Fox News. Guess I’ll relax and watch the major networks fall over themselves to put out horror story “special news” tonight while AGAIN not touching on the real issues that led up to this. Thank god I have skills that translate well to mother Ireland. Seems they are a bit wiser and are expanding decent jobs. May the road rise up to meet you…oh never mind!
Kurt, My opinion has not changed. The economy will recover in about 5 years, assuming that Government stops the damned foolishness of making bailouts lending institutions, which they said they would not after bailing out Fanny May, etc. Bailouts should never have been done for either of them.
I saw this coming l2 years ago and sold out, my income does not even come into this country, it stays in foreign countries that have stable governments. We don’t. The stock market crash was predictable, Will it recover immediately> Yes Byy about 100 points and will be slow thereafter.
I’m adding to the economy. I just began the addition of a 12 X l6 new bathroom this morning. The stock prices don’t affect me. I don’t own one share of stock in in company in this country. For example: While we are embracing socialism/communism, China is embracing Capitalism. Cheri automotive is a GREAT BUY.
A sign that few on wall street know what will happen in the short term is the lack of excessive put purchases today. Are the wall streeters scared the SEC is watching, or do they not know how to place their bets for maximum profits? Usually this kind of news gets the greedy out in force.
You beat me to it about the idiot JohnH…the other foolish john we have to get rid of for our own sanity and future! Who knows how long this could last? We have several stupid conservatives still willing to vote for the crooks that made this mess what it is. Some fools never learn. Witness our selfish Johnny Boy H thinking this won’t affect his obviously superior self. Pride before fall and all that! I must admit when some started posting about the depth of this mess a while back on this blog I did not believe it. As a life long republican conservative it was hard to swallow. I did some research and you are right on. Sad at best, criminal at worst. Many of these guys should be in prison, including most of the white house crew. Heaven help us all…
I have no answer to your questions Kurt and I doubt that anyone else does either. I do know the mainstream press did not get the word out as well as they could have. Everybody now pulling from the same virtual news pools with no budgets for investigative reporting sure blows sometimes.
johnh and Senator McCain are right when they say the economy is in good shape and there are always ups and downs in a free economy. If the liberal communist democrats would keep out of regulating business it would work itself out. If people can’t handle their money and borrow to much or get fired it’s their own fault. They should be out on the street. And if we had done what McCain said and put the social security money in the stock market there would be more invested and maybe it wouldn’t crash. If McCain is elected president the rich people like johnh might invest in America instead of other countries and then everything will be real good again.
The stock market today is NOT the stock market of our Fathers, A 350 point
swing is the norm today, so worry about 500?…NOT. It will pick that back up with just moderate good news. Today there are a million amatures investing, as it has become “convenient” using the internet. These people are solely responsible for the wild swings as they panic. (did I mention amature) It is not a bad thing, as we eliminate middlemen who only care about dollars, not you! But the price we pay for so many amatures in the market is “wild swings” based solely on bad news, business forcasts, and Fed comments. We are still the world leaders in this field and will continue to be strong. Just educate yourself on what to invest in and when, then hang on! your in for a ride!
Johnh, Slugger: Knock off the name-calling and ad hominem attacks. I’ve deleted the garbage. Now stick to the topic.
I’m no economist, but I’ve read a bit of history, and I recall that our economy has always bounced back. So I doubt that the current market condition is any exception. I think Augustine may have said that “Patience is the companion of wisdom”, and if he did, he was probably right!
Like Johnh, we own no local stocks. But unlike Johnh, we own no foreign stocks. We continue to pay off student loans, and even with double payments, we’ll continue to do so for several years…and then some!
johnh, for someone who claims to be so successful at everything you touch, you have a lousy sense of economics. The bailouts that have been done have been necessary to avoid broader collapses and to keep the world’s faith in our investment system here, which is the class of the world. Don’t take my word for it, you can read that very thing in any economic article at any news site on the web…
Kurt, we never have a blog when the down rises hundreds of points, only when it falls hundreds of points. The fall yesterday was also in response to the continued plummet in oil prices and the fall of overseas exchanges as well, not just because of Merrill and AIG. It’s one day on the market. Today the bargain hunters will be out in force and the market will go back up some…