Dow below 10,000, why?

[SarahLovesJS]

The Dow just dropped (this morning) below 10,000..can someone explain to me why it is continuing to drop or give me any theories/ideas? I mean last week I thought Wall Street was throwing a tantrum over not getting the bailout, but now the bailout passed so what is going on? Econ is not my area/major, so any help would be great. Article about it

 

[movie zombie]

because the bailout isn''t going to work.

and Europe is in a mess scrambling to stay above water.

movie zombie

 

[SarahLovesJS]

Yeah, I saw that the article said the freeze is already happening and I''ve also seen the questions about it not being enough so I guess that makes sense. And that makes sense about Europe, too. Ty movie zombie!

 

[Dancing Fire]

b/c we''re in a world wide recession.

 

[strmrdr]

They want more money and the fed is giving it to them.
The problem is that banks are over leveraged with nothing to back it up.
The firms that went belly up were leveraged 60 to 1.
That meant that if 1/60th of the people wanted their money out they were dead.
Banks figured out how to get around the 9 to 1 limit which is why the fed has to pump out trillions of dollars to cover the spread.
Which further weakens the dollar which causes more Banks worldwide to go under because the investments they hold even the good ones just lost a ton of value making them over leveraged.
The bail out bill makes it worse.
I have stated all along it was going to tank the dollar and it is.
The other currencies are falling in the same trap...
Everyone is printing more money to solve a problem of too much money and no value.
Not just the dollar is tanking but it is taking every world currency with it as they did the same thing!

http://news.yahoo.com/s/ap/20081006/ap_on_bi_ge/eu_europe_meltdown

 

[tanuki]

Because the real cause of this crisis wasn''t entirely the problems with people in subprime mortgages not being able to make their house payments.
They were making their house payments just fine until gas went over $4.00 a gallon and everything else went up too.

One of the things that made me so opposed to the bailout was there was no guarantee that it would work.
So here we are a day after the bailout with the stock market worse than ever.

How long do you think that it will take Wall Street to come to the congress and say "how about we make that double or nothing?"

 

[Dancing Fire]

Date: 10/6/2008 11:56:07 AM
Author: tanuki
Because the real cause of this crisis wasn't entirely the problems with people in subprime mortgages not being able to make their house payments.
They were making their house payments just fine until gas went over $4.00 a gallon and everything else went up too.

One of the things that made me so opposed to the bailout was there was no guarantee that it would work.
So here we are a day after the bailout with the stock market worse than ever.

How long do you think that it will take Wall Street to come to the congress and say 'how about we make that double or nothing?'

so now that gas is heading back down towards $2.70 a gal they can afford their house payment again?

IMO...all this was due to the housing bubble.

 

[strmrdr]

Date: 10/6/2008 12:08:25 PM
Author: Dancing Fire

Date: 10/6/2008 11:56:07 AM

Author: tanuki

Because the real cause of this crisis wasn't entirely the problems with people in subprime mortgages not being able to make their house payments.

They were making their house payments just fine until gas went over $4.00 a gallon and everything else went up too.


One of the things that made me so opposed to the bailout was there was no guarantee that it would work.

So here we are a day after the bailout with the stock market worse than ever.


How long do you think that it will take Wall Street to come to the congress and say 'how about we make that double or nothing?'

so now that gas is heading back down towards $2.70 a gal they can afford their house payment again?

IMO...all this was due to the housing bubble.

The housing bubble is only a symptom of the real problem.
The real problem is too many dollars and not enough value brought on by over printing and low interest rates with nothing of value being produced.

Mutual back scratching societies can not survive.

 

[mrssalvo]

it''s what happens when the gov''t gets involved in the free market. they should have stayed out years ago and stayed out again trying to "fix" it.

 

[MoonWater]

 

[AGBF]

If you don't mind a superficial answer, I actually think it's a response to the European and Asian markets that plummeted. You all know that the stock market is not my forte, and I know that the plunge in the European and Asian markets has its own causes, but I think that the proximate cause of today's plunge in the US market is the overnight plunge in Europe and Asia. But I could be wrong.

I am trained as an historian and a social worker and I have not discussed this with my other half, who balances the family checkbook and does the taxes .

Deb

 

[Rank Amateur]

Maybe the stocks were over-valued.

 

[Beacon]

Someone has posted that the reason for today's drop is that there are "too many dollars". Incorrect. In fact the US dollar has rallied substantially. For example, earlier this year it took $2.05 to buy one British pound, it now takes $1.75 to buy one British pound. Same thing with the Euro. Earlier this year it took $1.60 to buy a Euro, it now takes $1.36 to buy a euro.

Today's drop has multiple factors, not least of which is some forced selling from hedge funds and mutual fund redemptions. Underlying economic realities are becoming plain to even the most obtuse, i.e. the consumer is shutting down. The credit crisis continues and business are often unable to borrow at all or under very poor terms. Our huge decline today is on fairly light volume, many people are too scared to buy and those who wish to sell are finding it difficult.

Is today's decline deserved? Probably. We can go lower from here. But fear is at such a high level that one has to start making a list of stocks that are of interest at such reduced prices.

 

[strmrdr]

Date: 10/6/2008 12:43:43 PM
Author: Beacon
Someone has posted that the reason for today''s drop is that there are ''too many dollars''. Incorrect. In fact the US dollar has rallied substantially. For example, earlier this year it took $2.05 to buy one British pound, it now takes $1.75 to buy one British pound. Same thing with the Euro. Earlier this year it took $1.60 to buy a Euro, it now takes $1.36 to buy a euro.

The dollar hasn''t risen they dropped.
Compare today''s dollars buying power to the dollar of 20 years ago.

 

[Beacon]

Date: 10/6/2008 12:48:18 PM
Author: strmrdr

Date: 10/6/2008 12:43:43 PM
Author: Beacon
Someone has posted that the reason for today''s drop is that there are ''too many dollars''. Incorrect. In fact the US dollar has rallied substantially. For example, earlier this year it took $2.05 to buy one British pound, it now takes $1.75 to buy one British pound. Same thing with the Euro. Earlier this year it took $1.60 to buy a Euro, it now takes $1.36 to buy a euro.

The dollar hasn''t risen they dropped.
Compare today''s dollars buying power to the dollar of 20 years ago.

The dollar has rallied against other currencies so that has little to do with today''s decline, which is what the OP questioned.

 

[strmrdr]

some numbers to make you cry...

 

[strmrdr]

cost of living

 

[strmrdr]

Date: 10/6/2008 12:51:39 PM
Author: Beacon

Date: 10/6/2008 12:48:18 PM
The dollar has rallied against other currencies so that has little to do with today's decline, which is what the OP questioned.

The root cause of it all is the dollar.
The Asian markets went down because they are selling less goods and will sell less goods to the US plus they have the same problem of over extended banks.

 

[SarahLovesJS]

Date: 10/6/2008 12:57:32 PM
Author: strmrdr

Date: 10/6/2008 12:51:39 PM

Author: Beacon

Date: 10/6/2008 12:48:18 PM

The dollar has rallied against other currencies so that has little to do with today's decline, which is what the OP questioned.

The root cause of it all is the dollar.

The Asian markets went down because they are selling less goods and will sell less goods to the US plus they have the same problem of over extended banks.

And they are absolutely terrified of anything that looks like it could be another Asian Financial Crisis. Poor Asia.

Moreover, poor retirement funds!!

ETA: By be I mean cause.

 

[Beacon]

I think the market is well aware of this published data and has not woken up this morning and rushed to sell due to this well known information.

The major issues are the rapid deleveraging and inability of businesses to obtain credit to run their operations coupled with a big fear of subsequent events. We also have some pretty scary headlines from foreign countries regarding their own banking problems which are causing multi market selling panics.

Reading the papers over the weekend was enough to scare most everyone to death. Not in my life have I read so much remarkable news compressed into such a short time. Right now people want to own CASH not stocks and that is why we are seeing the selloff.

 

[strmrdr]

Date: 10/6/2008 1:04:09 PM
Author: Beacon
I think the market is well aware of this published data and has not woken up this morning and rushed to sell due to this well known information.


The major issues are the rapid deleveraging and inability of businesses to obtain credit to run their operations coupled with a big fear of subsequent events. We also have some pretty scary headlines from foreign countries regarding their own banking problems which are causing multi market selling panics.


Reading the papers over the weekend was enough to scare most everyone to death. Not in my life have I read so much remarkable news compressed into such a short time. Right now people want to own CASH not stocks and that is why we are seeing the selloff.

That is part of it for sure.
What I was showing is that this has been a house of cards for a while that is falling down fast.
For example.. low interest rates == low savings which leads to more borrowing which leads to more leveraging by banks because they don't have the reserves.

 

[AGBF]

Date: 10/6/2008 1:04:09 PM
Author: Beacon


I think the market is well aware of this published data and has not woken up this morning and rushed to sell due to this well known information.

The major issues are the rapid deleveraging and inability of businesses to obtain credit to run their operations coupled with a big fear of subsequent events. We also have some pretty scary headlines from foreign countries regarding their own banking problems which are causing multi market selling panics.

Beacon, I am trying to learn from you. The two statements above, which I excerpted from your posting, seem to me to be mutually exclusive (perhaps because I do not understand the former). I thought that you were saying that on the one hand no one woke to the news of the plummeting European and Asian markets and reacted with upset to them because they had already known all the data that went into the decline of those markets, but that on the other hand the scary headlines caused multi market selling panics.

This may not be what you are saying. Would you, please, explain?

Deborah

 

[tradergirl]

Jim Cramer panics and says to get out of the market. The last time he did that in 1998, it was the bottom of the Long Term Capital Management crisis.

I have been bearish for 3 years and have made a fortune shorting this market but I am now starting to get in on the long side for a countertrend rally. I don't think this is "the" bottom (I think that will come next year) but there should be a vicious trading rally around here somewhere.

I hear "by Friday, the CDS settlement will be done for Lehman. The Fannie/Freddie settlement today seems to be going fairly well (which is to say the world has not ended so far).

 

[Beacon]

Date: 10/6/2008 1:17:16 PM
Author: AGBF

Beacon, I am trying to learn from you. The two statements above, which I excerpted from your posting, seem to me to be mutually exclusive (perhaps because I do not understand the former). I thought that you were saying that on the one hand no one woke to the news of the plummeting European and Asian markets and reacted with upset to them because they had already known all the data that went into the decline of those markets, but that on the other hand the scary headlines caused multi market selling panics.

This may not be what you are saying. Would you, please, explain?

Deborah

Sure. I was commenting on two large charts posted on this thread telling us that the cost of living has gone up over time. This information is well known and is not a reason that the markets would suddenly panic today. In fact the cost of living generally does go up over time, it''s normal and we can igore it unless it changes it''s speed very suddenly up or down. So those charts would not be responsible for today''s bad market.

So called "headline risk", which is what we read in the paper blasting at us could be part of today''s trouble. Meaning we have some pretty new and bizarre information coming across the news these days. How often do we read about a whole country more or less melting down, like Iceland is now doing?

Since these headlines are new, dramatic and remarkable, they add to the general sense of panic out there and we get preciptious moves in the market.

Which is not to understate the seriousness of the matter. A very smart guy once told me, "sometimes panic is the right reaction."

The situation is very fluid and everyone is confused. I wish I had all the answers but I sure don''t!

 

[starsapphire]

Date: 10/6/2008 1:26:00 PM
Author: tradergirl
Jim Cramer panics and says to get out of the market. The last time he did that in 1998, it was the bottom of the Long Term Capital Management crisis.

I have been bearish for 3 years and have made a fortune shorting this market but I am now starting to get in on the long side for a countertrend rally. I don''t think this is ''the'' bottom (I think that will come next year) but there should be a vicious trading rally around here somewhere.

I hear ''by Friday, the CDS settlement will be done for Lehman. The Fannie/Freddie settlement today seems to be going fairly well (which is to say the world has not ended so far).

Yeah, with Jim Cramer saying that, I think that just makes it worse. I read that this morning, and thought.....oh no......

 

[MichelleCarmen]

Date: 10/6/2008 12:43:43 PM
Author: Beacon
We can go lower from here. But fear is at such a high level that one has to start making a list of stocks that are of interest at such reduced prices.

Is there any possible way to make any money if a person was to invest a very small amount in stock? I''ve talked to a few friends and we''ve all been wondering the same thing. One of my friend''s husband bought some stock when it was ultra low, under .20 a share, and it went up to $4.00 or so but I''m not sure if he''s kept it or sold it before it slowly went down a bit, therefore not really making any additional "play money." I know this is silly, but I thought what if I bought $500 of a really cheap stock. Could I make $5,000 or am I just dreaming?

 

[Beacon]

Poor Cramer. He gets so excited. I hope he doesn''t drop dead during this market.

It makes me want to puke on my shoes

, but I did buy some stocks today. The whole market in fact, the SPY. I could be dreadfully wrong, but I am willing to wait and collect dividends in the meanwhile. So I''ll take some more little bites into this horrid mess.

 

[Beacon]

Date: 10/6/2008 2:41:09 PM
Author: MC

Date: 10/6/2008 12:43:43 PM
Author: Beacon
We can go lower from here. But fear is at such a high level that one has to start making a list of stocks that are of interest at such reduced prices.

Is there any possible way to make any money if a person was to invest a very small amount in stock? I''ve talked to a few friends and we''ve all been wondering the same thing. One of my friend''s husband bought some stock when it was ultra low, under .20 a share, and it went up to $4.00 or so but I''m not sure if he''s kept it or sold it before it slowly went down a bit, therefore not really making any additional ''play money.'' I know this is silly, but I thought what if I bought $500 of a really cheap stock. Could I make $5,000 or am I just dreaming?

MC, you can make money by investing in stocks but please - buy quality stuff. No penny stocks, no gambles. Yes they can bounce around and sometimes they bounce up but it''s just not worth it. I would rather take that $500 and buy a cute piece of jewelry instead of a penny stock.

You would be better off buying very small bits of a high quality stock, or a diversified index, like the SPY or IJH. In other words, it is reasonable and even possible to get rich slowly, but getting rich quickly is quite a lot harder!

 

[Dancing Fire]

we mite see Dow 9000 today.

 

[purrfectpear]

Date: 10/6/2008 12:29:56 PM
Author: AGBF





If you don''t mind a superficial answer, I actually think it''s a response to the European and Asian markets that plummeted. You all know that the stock market is not my forte, and I know that the plunge in the European and Asian markets has its own causes, but I think that the proximate cause of today''s plunge in the US market is the overnight plunge in Europe and Asia. But I could be wrong.

I am trained as an historian and a social worker and I have not discussed this with my other half, who balances the family checkbook and does the taxes .

Deb

Ding, Ding....we have a winner. I don''t know what everyone else is smoking but today''s issue is strictly a reaction to the global market.