Today’s Market Action
Oct 13, 2008
Posted by Jody Eisenman | Filed under Uncategorized
As I write this, the Dow Jones has soared over 600 points. While stock traders welcomed the huge rally, the real issue is whether or not credit markets thaw. The announced by European and US governments to take equity stakes was a drastic step, but one that was clearly necessitated by market conditions. As today is Columbus Day (a bank holiday here), it is difficult to assess the credit market’s reaction. LIBOR and the TED spread have declined slightly. I hope this continues, but I haven’t yet seen any major movements.
I still believe that the Fed needs to unconditionally guarantee all bank deposits (not just $250,000). The economy is certainly in a decline, and I think this quarter’s earnings reports will not be pretty. Therefore, I don’t think we are out of the woods yet. Many prominent economists are predicting a long painful recession.
How low could we go? I couldn’t put a number on it today, but if you go back to the depression, stocks didn’t actually bottom until 1932. From peak to trough, the DJIA actually fell an amazing 89%. I’m not saying this is 1929, but, I think it’s difficult for someone to predict the bottom with any accuracy. As they used to saying the TV show “Hill Street Blues”, “Lets Be Careful Out There!”
