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Dow
It is often said 1929, and the following depression, could never be repeated because we (the regulatory bodies) now know how to handle things differently. The faithful may soon be given an environment by which they can put their theories to work. The likelihood of a Dow collapse, or related financial crisis that leads to a Dow collapse is quite high for the remainder of 2001. This is due to the blood on Wall Street, and related global markets/economies – this makes the financial markets, and varying instruments a little bit tighter, nastier, and wilder: one false move, and it is hello Fed crisis cut… Will investors react to what they know the Fed will do in the case of crisis? The last time I checked Greenspan was flooding the economy with money, and cutting interest rates, and no one seemed to care. What else can he, or anyone else do? Tap into the stabilization fund? Plunge Protection? Tax cuts that are a fraction of amount investors have lost spread out over 10 years? What makes people think 1929 can be avoided again?
When the Dow dropped below 9,378.38 it was officially in bear market territory (20% decline). But the phrase 'Dow Bear' brought about some hungry bulls. Financial stocks, and related issues remain a looming negative impacting both the Dow, and traditional companies. By traditional companies this means any company not recently growing at 40% and now lucky to bust 10% (tech). Goldman Sachs started the gloom off by reporting a 13% decline in earnings year-over-year earnings Tuesday, and Bear Stearns, and Morgan Stanley stung the street yesterday with sharp declines. With evidence that investment banking is dead, both because of the earnings, and lay-offs, Dow components Citigroup, and JP Morgan have had little choice than to head lower: both dropped again today, for the third straight session. Suddenly, the economic soft landing (by the action in f-stocks) is being debated. Only three areas helped the Dow today: tech, drugs, and Coke -- or 'bottoming', 'defensive', and 'soft drink king hitting a 52 week low, and rebounding'. Philip Morris traded as low as $41.47 - this is nearing the Wish List reevaluation level of $35-$39 Nasdaq Heavy institutional selling in Dow/NYSE components early in the day, and the movement of hoards of capital back into tech helped the Nasdaq gain. Micron Technologies offered hope when the company reported that revenues for the second quarter topped $1.08 billion (above most estimates), and earnings would be slightly above estimates (-0.1 cents). This news helped lift many stocks higher including those issues in the Philly semiconductor index (+12%). Craig Barrett, chief executive of Intel, said today that the outlook for the next 3 months doesn't look particularly bright" – Intel jumped by 11.%. Slogans Change, Markets The Same In early 2000 it was 'higher interest rates will not hurt stocks". In late 2000/early 2001 it was 'tech is having demand problems, but old economy stocks are OK'. Is it now "big technology stocks are bottoming, and everything else is in poor shape"? The markets have become a game of pass the hot potato, and anyone trying to justify stock price movements is simply trying to decide how long an investor can hold the hot potato before it burns his or her hand. There is no rational: only potatoes, and people. However, and as we are slowly finding out, sooner or later potatoes get dropped, and the game becomes a little less interesting. Is Tech really bottoming? Ouch. That's a hot one… |
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