September 16th, 2008, 12:34 AM
Today was a bad day for Wall Street. Lehman Brothers filled for Chapter Eleven bankruptcy protection (http://www.cnbc.com/id/26708143) and Merrill Lynch was bought by Bank of America (http://www.cnbc.com/id/26708319) to prevent its collapse. Also AIG is on the verge of collapse as well. All of this caused the Dow Jones Industrial Average to plunge 500 points in a single day. The last time this happened was on September 17, 2001, the first day of trading after the September 11 attacks. Tomorrow the Federal Reserve is meting to determine interest rates.
Overall Source: http://www.cnbc.com/id/26723090
September 16th, 2008, 02:52 AM
Tomorrow the Federal Reserve is meting to determine interest rates...and of course, they'll cut rates again... maybe by a full point! (the Fed could push rates to below zero and it still wouldn't be enough to keep Wall Street happy!)
More cheap credit won't solve the problem. We know what happened when the Fed pushed rates down to 2%-we were told the steep rate cuts were necessary to "save the housing market", "prevent a stock market Armageddon", "reduce our trade deficit", and to "avoid a recession" even though foreclosures are going through the roof, stocks continue to plunge, and our trade deficit balloned-while commodities blew through the roof- oil skyrocketed to nearly $150/barrel-although it has since faced a serious downturn, as of this post, it's trading around $92-94 a barrel on Globex. (closed today at $95.71)
As of this post, Dollar-to euro is about $1.42, recovered from $1.61=€ a couple months ago
$1.80 to Pound Sterling (£), had peaked at nearly $2.20=£ almost a year ago.
(apparently the "unacceptably strong" dollar is to blame for the stock downturn, even though a weak dollar policy-through steep interest rate cuts-has contributed to the financial jitters.
Even though we'll probably be told that we need more credit pumped into the markets, pumping credit (by printing money) into the markets will only make problems worse in the long run. (watch oil push well past $200/barrel within a few months in the name of "saving the stock market" which cannot be saved, just as we got $148/barrel for trying to save a housing market which cannot be saved either.)
The tech stocks and housing market bubbled because of cheap credit-yet we were told that more cheap credit was needed to solve the housing crisis-certainly that proved to be false. Pumping more cheap credit certainly won't save the stock market either.
Bush was probably right after all... Wall Street got drunk with cheap credit-even though Bush's policies, through Greenspan, Bernanke, and Paulson, are certainly to blame for all this.
One more thing:
Also I'm sick of the mainstream media pundits telling us how "we'll have another Great Depression if we don't bail out Freddie Mac/Bear Stearns/Fannie Mae" and "not enough liquidity in the stock market" (there may actually be too much liquidity in the markets-yet the DOW could push past 50,000 and investors would still be calling for more easy cheap credit from the Fed!)
September 17th, 2008, 02:56 AM
The Federal Reserve in a surprising move decided to keep the funds rate at its current level (http://www.cnbc.com/id/26740930). Also surprising in my opinion is that the DOW was able to post a gain today (http://www.cnbc.com/id/26737573). Earlier this evening the federal government announced that it was going to give AIG an eighty-five billion dollar loan (http://www.cnbc.com/id/26747020) in return for eighty percent stake in the company. Lastly oil has dropped to $91.15 a barrel (http://www.cbsnews.com/stories/2008/09/16/business/main4453819.shtml).