Another Nightmarish Day
Mar 6, 2009
Posted by Jody Eisenman | Filed under Uncategorized
As I feared yesterday, the selling took a one day break and then continued anew. The Dow closed down 280 points, and it seems apparent that there is really no price in sight that investors are willing to step up and buy. The day started with GE denying that they were in financial difficulty. Maybe so, but after similar announcements from (Lehman, Bear, AIG, Merrill, GM; take your pick!), there is very little confidence in any such statement today. GE bonds that mature this December were yielding over 8% this morning. The yield was around 2% in January. For a supposed AAA credit rating, this yield is enormous. Of course, there is as much confidence in the ratings agency as there is in a corporate CEO.
The market decline has been astounding. Stocks have lost almost a quarter of their value already this year. According to my friend SN, if the year were to end today, the period of 2008-2009 would be the third worst two year decline in history, behind 1930-31 and 1931-32. Once again, the financials led the market down. C dropped under 1. Wells Fargo continued its’ slide, closing down another 16%. JP Morgan, which is rumored to have counter party risk to GE, lost almost 14% to close at 16.60. Despite these declines, I still believe the market is vulnerable to more losses. There are at least five major companies on the verge of bankruptcy right now. If at any point, either GM, GE, AIG, C or BAC were to go belly up, I think the effects could be cataclysmic. The good news is that I’m sure the government realizes this, and will take whatever steps necessary to stop this from happening. However, I also feel that we are in a boat that has sprung about 15 leaks. I’m just not sure the government can deal with them all successfully. Tomorrow will bring a huge amount of economic data, including the unemployment numbers. I expect the volatility to continue.
