Saturday, September 27, 2008

3 things are crystal clear:

1. The U.S. credit engine is already melting down. In fact, just this week, the all-important market for short-term commercial paper has come to a virtual standstill. This is precisely the market we warned you about. Now it's collapsing. And if this pattern continues, it's likely to drive many corporations that depend on this instant cash into instant bankruptcy.

2. Although a massive federal bailout might help rally the stock market temporarily, it is not — and will not — reverse the credit meltdown.

3. Quite to the contrary, fear is now spreading throughout the banking industry, driving many Americans to pull their money out of the financial system entirely. Yes, it makes sense to shift from weak to strong institutions, and that's rational. But the behavior we're beginning to witness is both irrational and dangerous.

Monday, September 22, 2008

Market Minute

For all the commotion. The final tally for the Dow this past week was a drop of 34

points. All told the Dow moved over 2,000 points last week. We saw the biggest

down day since 2001 and the biggest up day since 2002 all in the same week.

Don't fool yourself into thinking this debacle is over. The economy is still on

shaky ground.

Friday, September 19, 2008

Pivot Points

A technical indicator derived by calculating the numerical average of a
particular stock's high, low and closing prices.

The pivot point is used as a predictive indicator.

If the following day's market price falls below
the pivot point, it may be used as a new resistance level.

Conversely, if the market price rises above the pivot point, it may act as the new support level.

Monday, September 15, 2008


I've been calling for Dow 10,600 for months now -- and for the drop to be driven by the combined and intertwined problems of the housing and financial industries -- and I'm more certain than ever that we'll hit that, and for those very reasons.

Going forward, we can also expect two more legs down in the financial sector. There's going to be more than a few headaches in the days to come. Most eyes are on the fate of one Dow component in particular, AIG.

AIG is connected to nearly all of the players in the financial markets -- if it goes under or becomes insolvent, it will impact the financial system in a big, bad way.

The company's losses -- $18.5 billion in the last three quarters -- have been widely attributed to a decrease in the value of credit default swaps tied to subprime mortgages, which it sold to protect its debt investors.

Lehman was also a big player in the credit-default swap game, and you see where it ended up.

Bottom line: There's plenty of money to be made in the financials -- it's just not happening on the long side.