Posted by Jack
“Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working.”
Ryan Detrick-Schaeffer’s Investment Research
Despite the bailout the market has retreated over 450 points in early morning trading, another black Monday. Ford has dropped to mid-$3, GM has halted trading! NYSE is trading at levels not seen since 04, some stocks are at historic lows for the decade. GE broke down to a 10 year low. But, oddly many bank stocks are holding up, possibly due to the bailout money and the fact they can’t be shorted. Money is tight and people are scared. Is this the time to buy bargains or put your money in the mattress?
Now this from the AP – Investors around the world have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets. Global banks, hobbled by wrong-way bets on mortgage securities, remain starved for cash as credit has dried up.
That has sent stocks spiraling downward in the U.S., Europe and Asia, and driven investors to sink money into the relative safety of U.S. government debt. Fears about a global recession also caused oil to drop below $90 a barrel.
“The fact is people are scared and the only thing they’re doing is selling,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working.”
The selling was so extreme that only 98 stocks rose on the NYSE and 3,114 dropped. That’s a telling sign considering the stock market is considered a leading economic indicator, with investors tending to buy and sell based on where they believe the economy will be in six to nine months.
Monday’s steep decline on Wall Street indicates that investors are becoming more convinced that the country is leading a prolonged economic crisis that is spreading to other nations. Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.