Freak Out Continues: Markets Close At Lowest Level Since 1997
Bad day on Wall Street today, folks. The S&P 500 closed at the lowest level since April 1997.
The NYT explains:
Analysts said that after fevered speculation last week about bank nationalization, many investors now expect the government to move in that direction, despite statements from the White House supporting a privately held banking system. Stock markets dropped on Friday amid concerns that a broad government takeover could wipe out financial shareholders.
Now, with the government set to begin the "stress tests" on Wednesday, investors want to know which banks will be deemed healthy and which will not, analysts said. Of most pressing concern are big banks including Citigroup, Bank of America, Wells Fargo and JPMorgan Chase, followed by regional chains.
Those stress tests, meant to identify the banks that require government help, seem to be adding stress to the markets.
Fortune says:
Testing big U.S. financial firms seems like a good idea. But bank stocks, which were already hit hard before Geithner revealed the plan last week, have only been under renewed pressure as investors have been taking bets on which banks might fail stress tests - and possibly be forced to sell more stock to the government, further diluting shareholders.
Bank stress tests cause more stress [Fortune]
Stocks Slump on Corporate Woes; Indexes Fall by 3.4% [NYT]
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Comments:
Thanks Obama!
im buying stocks as soon as my next paycheck comes in. Anyone know a good service to use?
@Plates:
Dude, you been living under a rock or something? Obama's been in office for 30 days. This crap's been going on for years. Get a clue.
LOL Skifree?
Consumerist, you're the bestest.
@Lucifer_Cat: If you have to wait for your next paycheck, buying stock with it may not be the best course of action.
@Plates: Blaming Obama for this is the equivalent of going to the circus and blaming the guy with the huge shovel for all the elephant shit in the ring.
@legwork: LOL i thought it might come off as that. I kind of sort of have OCD, i like my budget numbers to look symmetric.
I always planned to get into stocks at the end of Feb. Looks like the timing is going to be just right :P
Lucifer_Cat: My buddy uses ScottTrade...
JohnfromBrooklyn: The largest problem with your hypothesis there is what money exactly are people going to invest? They are up to their roofs in debt. They are fearful for their jobs... They don't have much ability to save if they don't have much cash coming in over and above what pays the bills. The $50,000 brokerage accounts have now plummetted to $1000. How do you propose they gain that value back? Praying?
People will probably start to save what they can, but it will not go into the market right away, because you have to have 10,000$ just to try to get in on a decent index fund without a shitload of fees. Any recovery will be very slo-o-o-o-ow.
@Nathan Yost: Not to mention the "markets tanked the moment he signed the bill" fallacy. The bill being implemented became a certainty when the Senate passed it on thursday night. They had 5 days after that to react to it, till he signed on tuesday.
I wish the gov't would STOP even THINKING about doing anything and just put out a hard-line: That's it. We're done. Sort it out yourselves.
All this wishy-washy allowing for speculation about the gov't next step is killing ANY chance of recovery. Ugh...
@Streyeder: I agreed, either nationalize or don't. Both options suck, but at least there's certainity. The market can respond to just about any event but uncertainity.
Glad I waited for the sale to deepen to put more in my Roth. Score!
So after today we raced to position number 2 in the top 10 worst crashes since 1900...champagne anyone?
@SexCpotatoes: Vanguard funds lowered their entry amount to $2500 from $3000, possibly because everything is so worthless right now.
But it's still hard to buy multi-thousand dollar chunks of things, only to watch the market move to ever-increasingly historically low levels.
@Lucifer_Cat: I am a big advocate of "dollar cost averaging". That simply means you put in a little each time (e.g. use your employer's 401k plan, also many mutual fund companies will allow you to schedule regular withdrawals from your checking account). The idea is you don't know where the exact bottoms and tops in the market are so buy a little at a time over a long period of time.
I recommend using a mutual fund that invests in stocks and not buying individual stocks through a brokerage account unless you have taken the time to learn what you are doing. It is called "diversification". An average individual can only afford stocks from a few companies. If one of those companies goes belly-up it really hurts. When you buy a mutual fund you get a portfolio of usually hundreds of companies.
Hope that helps.
@MaytagRepairman: I sure do appreciate the help. I was thinking of a low cost index fund. [TBH though, i wouldnt mind buying a little bit of MS or GE]
Of course, 1997 is when I started investing in my 401K. With employer matching, I've lost about 4% per year since then, (but I've saved on taxes). Also, when (and if) the market goes back up before I retire, because I'm continually buying, the value of my 401K should shoot up quickly.
This is a ringing endorsement for the BO stimulus plan.
@legwork: When you can actually get in on the action for small expendable amounts of cash it isn't that bad of an idea. As long as it is money your willing to lose potentially. Wall Street has proven they are little more than sanctioned gambling anyways.
I seriously considered buying some GM stock when it fell through the floor. I still might. Someone talked me out of buying Harley Davidson stock when they went public and shares were fairly cheap because it was a "bad idea". Sometimes that conventional wisdom is total shit.
@Lucifer_Cat: MS and GE are often listed in the holdings of many index funds. For example, I have some of my retirement in Vanguard Large Cap Index. It holds 745 stocks and MS and GE are listed in the top 10 holdings.
@Lucifer_Cat: Someone mentioned Ameritrade when I asked the same question. They have low or no minimums and low fees. I have no clue about their solvency as a business so I can speak to that yet. They were the best looking option for really small investing if your trying to pick up some bargains with a small amount of money.
[www.tdameritrade.com]
@Plates: Such is the best "wisdom" of what Republicans have to offer after destroying this nation.
Thanks, Plates!
@Dave J.: But when the elephant has left the ring and the shit continues to pour in, the shovel man has to have some bit of responsibility when his shovel is really about to be used to smack the heads off of the animal trainers and take control of the entire circus and centralize that under the guise of cleaning up the shit.
@Con Seannery gives up on subtlety, BAN FACEBOOKERS!: Until the elephant trainers sneak back in, wearing scary clown makeup disguises, kneecap the shovel man then replace his shovel with a teaspoon, rape the elephant then splash the audience with gasoline then set them on fire - something to do with Free Markets and Social Darwinism.
And eat the few remaining children who managed to escape the conflagration. Raw.
Excuse me, the stimulus plan hasn't even been put into use, much less given time to work even if it had, Kevitivity.
@Kevitivity: The Box Office stimulus plan? I had no idea that The Watchmen was expected to do so well!
@savdavid: The stimulus plan isn't going to work and was never intended to stimulate anything but pork and the wallets of the chosen few.
@savdavid:
Ah..but the market reacts to how it thinks the stimulus will help/hurt businesses in general.
It's how the stock market works...it goes off of all past and current information...and projects how the future might be. Based on all that information, institutional and private traders either bull or bear the market. That's why you see it down, and that's how the legislative and executive branch have influenced the market. Traders know the stimulus has little to know chance of pulling us out of a recession.
Is there any reason to assume we won't end up with a situation similar to Japan, and this whole thing ends up taking 20 years to work itself out? I still think the market is to volatile to invest in, but I always have. My 346,000 is earning a safe 3% and I haven't lost anything in this crash. Granted the market was giving 8% returns, my problem is few people seem to know the best time to pull out and not lose 50% in less then a year.
@skipjack: Versus, donno, being forced to nationalize our largest financial companies b/c of their malfeasance. That wouldn't affect the Dow, at all.
Also, the Street is very bad at horizons longer than one quarter, infamously so. Our economy is likely to be crippled by past mistakes far beyond that, so this is likely to impact the indexes for at least eighteen months.
Of course "it's the bailout" is sexier, simpler and fits within the media's generally right-wing take on all things socioeconomic. But that doesn't make it correct. :)
@skipjack: Which is why if the government would stop messing around, just put in their hyped up, "long overdue" regulation, and quit trying to force the recovery, the markets would stop having so much to react to. At least when non-government related information comes in it tends not to have such a drastic effect.
@johnfrombrooklyn: Just because you need money for retirement doesn't mean that you can create it through magic. And housing prices still haven't dropped enough for people to even have any money to invest.
How about a little protectionism here people? We need to bring jobs back to this country.. that is the only way back from this mess-- we need to make things again. Pure and simple...
@Trai_Dep: Body Order Stimulus plan. It doesn't smell as bad the one that came out of Washington early this month.
@t-r0y: I heard the Senate version, the Burnt Onion Stimulus Plan, passed. I'm sure the differences between Senate's and yours will be ironed out in committee.
I read on a blog that in the proposed "Stimulus II" which is due out in early July, the government will be wetting up a website that allows investors who have lost money in the markets to be able register and download a coupon for up to $3,976,510.08 in government money ($1,500 for married households) to offset losses in equities.
For some odd reason, they capped the married bonus money at substantially less than for singles. I'm waiting for more details to emerge. I think I read the the US government is going to collect an income tax on the citizens of Lithuania to offset the costs to US taxpayers.
@Lucifer_Cat: I like Sharebuilder.com mixed with a high interest (yeah right, high... laugh) savings account through ING. Since they are the same company you can instantly transfer money into your stock portfolio if something looks good to buy. Otherwise you have to wait 24 hours for the funds to clear.
go through google and type in both "ING Direct coupon code" and "Sharebuilder Coupon code" to get some free money for signing up. I got 25 bucks for ING and 50 for Sharebuilder (after a few weeks of course).
BTW I just got into the market too and while I wish I would of waited til this week, I still am only down a couple hundred bucks from buying a couple months ago. I'm betting more on the long term. Look into Alcoa!
@Trai_Dep: Because of the need to get them passed quickly, they ironed out the differences before finishing each one.
Try to keep up ;-)
@Lucifer_Cat: Lucifer, this isn't necessarily the bottom. And even if it is, you may have a few years of sitting at this bottom before it starts an assent.
@Con Seannery gives up on subtlety, BAN FACEBOOKERS!: If Windows 7 continue to "phone home" to Microsoft every you start it up, to see if you are worthy of continuing to use your files, well, you may not want to buy MS after all.
@Plates: Why are you still even allowed to post here and not banned yet? You post only to knock Obama with no evidence to back it up then disappear.
@Plates: Just wait, Obama is just getting started. The One World Government takeover is now under way! It first starts with the control of the financial and monetary systems, then our hearts and minds.
@Trai_Dep:
Nationalization is the WRONG move. The companies need to eat their losses, the market needs to correct the problems and only then will recovery happen.
The longer the government artificially props up certain markets..the more damage occurs to the national economic climate....or so history would show.
This is all being driven by forced redemptions. Sooner or later people will realize they have to save for retirement, that 1% savings accounts won't get them there, and the market will start to climb back up. In the meantime, hold on for your life.