Daily Investment Interpretations

December 1, 2008

2008-12-1:  The markets tanked today, with the NASDAQ relinquishing 137.30 (8.95%) to land at 1,398, the Dow parting with 679.95 (7.7%) to close at 8,149, and the S&P giving up 80 points (8.93%) to end at 816. For the Dow, this was the fourth-largest single-day percentage drop ever. Oil fell $5.15 to $49.30, and gold collapsed $42.20 to $776.80. The VIX rose 6.87 to 62.71. The cause seems to have been global economic weakness. The National Bureau of Economic Research has officially confirmed that the U. S. has been in recession since December, 2007. That's a full year, and we're sliding deeper. It will get worse before it gets better.
    The real reasons for today's market slide probably won't become available to the public until tomorrow (that being the usual pattern). Today, the markets gave back about 60% of the gains they made over the past five trading days.
    Here's an interesting set of advice for the intrepid investor: Three ETFs to consider if the Dow retests lows, and The Investment Rate and a Greater Depression. The author argues that the Dow will retest its week-ago low of 7,400, and that this will provide another opportunity to buy in at the bottom. However, this will be a trade only for short-term traders. Longer-term, he believes that we are headed for deeper economic malaise... either stagflation, or a "Greater Depression".
    Last week's issue of Business Week contained a feature article warning that The Subprime Wolves Are Back. It lists several companies that are using an agency (the FHA - Federal Housing Administration) that hasn't preciously been cited in the subprime fiasco, but that soon will be. These corporate entities are carrying on the pre-2007 subprime practices with would-be home buyers who are incapable of meeting their mortgage commitments. Another warning is coming in the credit-card arena where finance companies are continuing to push credit cards to the vulnerable. One banker cited his university-student daughter who continues to be bombarded with pre-approved credit cards. His daughter knows better than to take the hook, but not all men and women her age have fathers who are bankers, and who can caution their daughters against taking the bait of easy credit. Credit card defaults are rising rapidly. Tonight, on TV, within the space of a few minutes, I heard two ads offering to provide applicants with Christmas cash, no credit checks required, given the titles of their cars. Don't have enough money to go home this Christmas? No problem! Just sign over the title of your car (i. e., pawn it), and you can have the cash that you need this holiday season. 
    So maybe there's more pain coming than has been priced into the current stock indices.
    Here are three good articles:
How to play offense and defense in December
How to play a re-test
Dark December