Daily Investment Interpretations
October 9, 2008
Gold is up $24.50 to $904.50, and oil is down $1.11 to $88.95. The markets
yo-yoed up and down today, but eventually closed down, with the Dow shedding
another 189 points to close at 9,258.10. In three days, the Dow has fallen from
10,325 to 9,258--or a trifle over 10%. Today marks the one-year anniversary of
its all-time intra-day high of 14,199... a decline of 34.8%. At its intra-day
low of 9,196, it was off 35% from its intra-day spike a year ago. (Officially,
it's down 34.6%.) The International Monetary Fund warned today that the world is
tipping toward recession. Also in today's news, the world's central banks
reduced interest rates ½ %. Obviously, this move had no huge positive effect
upon the world's stock markets. (The general consensus seems to be that the
problem now isn't the cost of money but concern about the abilities of
borrowers, and particularly, in light of continuing bank failures, of banks to repay loans.) MetLife's announcement that it needs to raise more capital,
presumably because of exposure to American International Group, Lehman Brothers,
Washington Mutual, and Freddie and Fannie spooked insurance investors.
Meanwhile, the Fed has given American International Group another $37.8 billion
amid a public relations scandal in which AIG spends $440,000 wining and dining
70 outperforming agents for a week at a plush spa ($6,300 per week per agent)
and is preparing the same kind of treatment for another group of
employees: AIG, Castigated for Resort Event, Plans Another One Next Week.
The Nasdaq fell 14.55 points to close at 1,740.33, while the S&P gave up 11.29 points to end the day at 984.94. The VIX hit a new all-time high of 59 today before closing at 57.5. Peter Brimelow writes: Dow Theory signals end of bear market.
A "dead-cat bounce" would seem to me to be entirely appropriate at any time now. I think it's a measure of how grim the morrow appears that this hasn't already happened, after a three-day, 1,000-point slide in the Dow. But with governments thinking outside the box and springing surprises every other day, this is an unusually volatile and unpredictable marketplace.