You read here on October 12 that the Dow Jones was in for some pain (http://services.thebankruptcynews.com/blog/?p=70).
We said that “The Wall Street sponsored media should start next week pandering bad news and creating a climate of fear using the available examples of very bad October markets. Expect myriads of articles about 1929 and 1987.”
The fear climate is being fueled by the media as we predicted.
We are seeing the effects of the Key Reversal Day and most probably the market will keep going down to around 12,600 (we will see exactly where they stop the fall when we get there). At around that point, I would expect a lot of clamoring for help from the Fed. The Fed should oblige.
All the chatting about SIVs is hiding the facts that
- Wall Street created the current crisis by taking in risky loans
- At the peak of the lending spree Wall Street pressured Congress to change the bankruptcy law to make harder for home owners to protect their homes by declaring bankruptcy
- They will benefit at the expense of the American Public, which will make sacrifices to maintain a failing economy in the noble name of national security and the protection of our troops
- The administration is helping to organize one of the largest concentrations of capital seen since the 80s
- The largest banks are bailing themselves out because they don’t need to show loses if they don’t need to sell SIVs
- The financial engineering it is making this possible is very similar to the financial engineering of Enron (the only difference it is that now it is the largest financial institutions that are involved)
Update at 12 EST
As expected, “The Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains.”
The most probable answer will be to inject more liquidity. If you want to better understand what does it mean for you and why it is not going to help you, please read
Once you understand how inflation robs you, read the article Inflation ex-inflation to be Official Fed Policy? to understand why you will never read on the newspapers that you are being robbed.
Remember this is not financial advice, only political/economic opinion. Check the About page for disclosures.
This article is part of the series "Exercise in Market Timing"
- Expect increased volatility
- And we got increased volatility
- Bad News For the Dow (Short Term Bear Fest)
- Dow Jones 400 to 600 more points of pain
- After exiting two weeks the Dow Jones goes nowhere
- Dow Jones at 13,300.02
- Dow Jones at 13,099 should see a rest
- Dow Jones Finds A Convoluted Way to Do Nothing
- Dow Jones Ready for Next Leg Down
- Dow Jones 13,252. Not All Clear Yet
- Dow Jones: Announced 2-day Pullback Over
- Timing The October High And November Bottom Of Dow Jones
Franklin @ October 22, 2007