Daily Investment Interpretations
November 13, 2008
Well, the unfathomable happened. The NASDAQ rallied 97.5
points (6.5%) today to end the day up, at 1,597,
the Dow advanced about 550 points (6.67%)
to 8,635, and the S&P annexed 59
points (6.82%) to exuent stage right at 911.29.
But this happened only after the indices fell about 3.5%
before turning around and heading back up. Why? I haven't a clue. The jobless
rate hit a new high of 516,000, the highest since September, 2001, during
the last recession. George Soros told Congress today that we're heading into a
very severe recession, and possibly, a depression. Crocs lost 50%
of its value in one day, and one-third of homeowners are losing money. The
Federal deficit ballooned to $237 billion in
one month, GE shares fell to a 12-year low at $16.89, and GM fell to $2.95,
giving GM a total market value of $1.8 billion. A billionaire could buy
the company if he/she wanted it. Of course, GM's earnings-per-share is -$40.14.
It has fallen by a factor of more than 10 in a year's time.
Oil ended at $58.55 a barrel, while gold swooned to $705, after falling below $700. The VIX? The little spalpeen has skidded to about 60.
Kevin Depew predicted yesterday on technical grounds that there would be a brief, sharp, counter-trend rally for the next 12 days, through the end of November: Five Things You Need to Know: Is This the Bottom?. Then it's back to the salt mines. In another Minyanville quote from Wednesday afternoon: "Bulls are conscious of a sharp counter-trend rally in the works. One option can be to dip a toe in the Ultra S&P 500 (SSO). Keep an eye on S&P 840 for any signs of a reversal.". Obviously, both of these prophesies were spot-on. Another eye-opener: Everyone Agrees: Worst. Economy. Ever. Still another opinion concerns gold: Minyan Mailbag:: Gold to Break to Upside, Dollar to Collapse.
The markets have held above their lows for a little more than a month now, if we consider today's action to be holding above 840. A bounce is in the forecast, but not a longer-term recovery. For one thing, GM and Ford are going on life-support. The problem is: they got where they are under their own power, and the same management is still in charge at both companies. The consensus is that they will become holes in the water into which the government must pour more and more money... that their "rescue" will only perpetuate the problems that took them down in the first place. Now GE is giving disturbing signs of following in GM's and Ford's footsteps. AIG is a bottomless pit for federal funds, even as its management publicly frolics at the taxpayers' expense.
Are we going lower after a technical bounce? We've had these kinds of jumps three other times in the past month.
Chuck Jaffe: Collectibles offer comfort, not investment profits
The Rapidity of the Early-October Decline
What's nothing less than stunning about the October decline through October 10th is the speed with which it occurred. The 7-day crash began on the 2nd of October and concluded on the 10th of October, during which time the S&P 500 fell from 1,160 to 840... 320 points or 27.6%... in 7 trading days! Since then, for 24 trading days, the stock market has remained in a highly labile trading range. But as the 10-year S&P chart shows, everything over the past couple of months is very compressed with respect to time... which makes this current contretemps seem more climactic, and possibly more dire than most.