Tuesday, September 30, 2008
Dow Suffers Biggest One Day Drop.....Ever!
Apologies for not posting the last week. Blogger again shut us down claiming the blog was spam.
I am not happy as I missed out on writing about one of the most turbulent week in market history.
In a nutshell, more banks have gone bust on both sides of the Atlantic and Paulson and Bernanke put forward a $700 billion bail out plan to Congress whereby the Fed would buy "toxic" securities on the bank books which will allow the bank balance sheets to appear more healthy and help recapitalise them (they can set aside less capital against healthier balance sheets) and encourage traders to again buy financial stocks if their accounts were more transparent.
Not all of Congress liked it. They did not want tax payers bailing out Big Banks. The bill was not passed Monday and the markets went into complete freefall.
The Dow lost 777.68 points, or 6.98 percent, to close the session at 10,365.45. The bank heavy SPX gave up a whopping 106.85, or 8.81 percent, to 1,106.42. The Nasdaq fell 199.61 points, or 9.14 percent, to 1,983.73. We have no play on.
Stocks started the session to the downside following news that Citigroup (C) was buying the banking assets of Wachovia (WB). Banking stocks also suffered on news foreign central banks bailed out several European financial firms including Fortis and Bradford & Bingley. However, these declines were only the beginning with news that Congress had rejected the $700 billion bailout plan.
Monday’s declines were the largest for the major market indices since 1987 and the largest point decline ever for the Dow!!
Bush, Bernanke and Treasury Secretary Paulson have been saying that a bill MUST be passed quickly to avoid a deep recession, so the failure of a bill to pass has created some panic. The VIX fear index soared on the session with the VIX up 34.48 percent to 46.72. It has been more than six years since the VIX has traded at this level.
Apparently CNBC told me that the SPX lost $700 billion in value Monday after Congress voted not to accept the bailout legislation!
Now it will be very interesting to see if Fed leaders were right and a deep recession occurs or if the housing sector will work out its own problems without the need to use tax payer dollars. The concern is that the credit markets will lock up, virtually stopping the flow of capital throughout the global economy. When small and large businesses alike can’t get capital to fund their day to day operations, business does not get done and it could lead to serious problems and significant drops in the stock market.
Lets see.
Until next time.
I am not happy as I missed out on writing about one of the most turbulent week in market history.
In a nutshell, more banks have gone bust on both sides of the Atlantic and Paulson and Bernanke put forward a $700 billion bail out plan to Congress whereby the Fed would buy "toxic" securities on the bank books which will allow the bank balance sheets to appear more healthy and help recapitalise them (they can set aside less capital against healthier balance sheets) and encourage traders to again buy financial stocks if their accounts were more transparent.
Not all of Congress liked it. They did not want tax payers bailing out Big Banks. The bill was not passed Monday and the markets went into complete freefall.
The Dow lost 777.68 points, or 6.98 percent, to close the session at 10,365.45. The bank heavy SPX gave up a whopping 106.85, or 8.81 percent, to 1,106.42. The Nasdaq fell 199.61 points, or 9.14 percent, to 1,983.73. We have no play on.
Stocks started the session to the downside following news that Citigroup (C) was buying the banking assets of Wachovia (WB). Banking stocks also suffered on news foreign central banks bailed out several European financial firms including Fortis and Bradford & Bingley. However, these declines were only the beginning with news that Congress had rejected the $700 billion bailout plan.
Monday’s declines were the largest for the major market indices since 1987 and the largest point decline ever for the Dow!!
Bush, Bernanke and Treasury Secretary Paulson have been saying that a bill MUST be passed quickly to avoid a deep recession, so the failure of a bill to pass has created some panic. The VIX fear index soared on the session with the VIX up 34.48 percent to 46.72. It has been more than six years since the VIX has traded at this level.
Apparently CNBC told me that the SPX lost $700 billion in value Monday after Congress voted not to accept the bailout legislation!
Now it will be very interesting to see if Fed leaders were right and a deep recession occurs or if the housing sector will work out its own problems without the need to use tax payer dollars. The concern is that the credit markets will lock up, virtually stopping the flow of capital throughout the global economy. When small and large businesses alike can’t get capital to fund their day to day operations, business does not get done and it could lead to serious problems and significant drops in the stock market.
Lets see.
Until next time.
# posted by Paul @ 1:20 AM 
