Stocks bomb as dire warnings shake markets. Stock prices suffered steep losses Friday as dire recession forecasts drove the global financial system into one of its most sickening downward lurches since the credit crisis began.

Story Highlights
NEW: Dow Jones loses more than 300 points
CAC-40 in Paris, Frankfurt’s DAX, FTSE 100 in London suffer heavy falls
South Korea’s KOSPI dives 10.6 percent, Nikkei loses 9.6 percent
Economic turmoil will be focus of two-day summit in Beijing, EU leader says

Markets are enduring one of their most painful days since the financial crisis began.

 According to early tallies, the Dow Jones industrial average fell 312 points, or 3.6 percent.

The Dow slumped as much as 504 points in the morning but came back to within 112 points of breakeven in the final hours before falling back.

The Standard & Poor’s 500 index fell 3.5 percent and the Nasdaq composite slid 3.2 percent. All three indexes closed at five-year lows.

“The selling today is the result of the broad weakness overseas,” said Michael Sheldon, chief market strategist at RDM Financial Group.

European and Asian markets also took a battering.

In Britain, where the government said Friday its economy had shrunk to the brink of recession in the third quarter of 2008 — news that sent the pound plunging against the dollar — the FTSE 100 dropped by 9 percent at one point. See how the markets are falling

The FTSE recouped some of its losses to end the day down 5.0 percent. Frankfurt’s DAX, earlier charting losses of 10 percent, rallied to also finish 5.0 percent lower while the Paris CAC index was 3.5 percent down.

With market convulsions toppling the price of oil from recent record highs, an emergency meeting of OPEC nations decided to slash output by nearly 5 percent in an effort to prevent a market collapse. But despite the cut, oil prices continued to fall.

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It was also announced Friday that Iceland is nearing a deal to borrow up to $2.1 billion from the International Monetary Fund to prop up its economy, the IMF and Icelandic Prime Minister Geir Haarde’s office said.

Iceland’s stock market crashed earlier this month and the government nationalized of three of the country’s biggest banks. Trading on the country’s stock market was suspended for nearly a week.

Looming recession fears were exacerbated Thursday by Alan Greenspan, the former head of the U.S. Federal Reserve, who warned of a “credit tsunami” and confessed he was baffled as to how the financial system has broken down.

In Moscow, trading was halted in both main exchanges at one point as concerns that falling oil prices would hurt the economy triggered sharp falls. AFP news agency reported both markets would be closed until Tuesday.

Asian markets also endured a painful session with South Korea’s KOSPI Composite Index closing down 10.6 percent and Japan’s Nikkei Exchange dropping 9.6 percent to a 5-year low on news Sony had halved its profit forecast.

Mumbai’s Sensex index closed near a three-year low having fallen 10.96 percent.

Oil producing cartel OPEC announced at an emergency meeting Friday it was cutting output by 1.5 million barrels to try to halt a collapse of in prices that has seen crude value drop by more than half.

The reduction failed to have an immediate impact, with crude trading down to around $62 a barrel — compared to the record $147.27 it reached in July.

The economic turmoil will be the focus of the two-day, 43-nation Asia-Europe Meeting, which opens Friday in Beijing, according to European Union President Jose Manuel Barroso. Watch how European and Asian leaders hope to tackle the crisis

Leaders hope this week’s summit in China will help bring agreement on a response to the crisis ahead of a November 15 meeting hosted by U.S. President George W. Bush in Washington.

“We need a coordinated global response to reform the global financial system. We are living in unprecedented times and we need unprecedented levels of global coordination,” The Associated Press reported Barroso as saying.

“It’s very simple. We swim together or we sink together.” Barroso outlined no specific proposals but said a solution needed to be based on transparency, responsibility, cross-border supervision and global governance. He also said the world’s financial system needed “major reform.”
Greenspan, who chaired the U.S. Federal Reserve from 1987 through 2006, said Thursday that whatever regulatory changes were made to respond to the crisis, “they will pale in comparison to the change already evident in today’s markets.”Do we really need to rebuild, asks Charles Hodson

Greenspan, who some analysts say did not do enough to control financial institutions during his two-decade tenure, made his comments in prepared testimony to the House of Representatives Oversight and Reform Committee.

Stock prices suffers steep losses as dire recession forecasts shake markets. Stock prices suffered steep losses Friday as dire recession forecasts drove the global financial system into one of its most sickening downward lurches since the credit crisis began. Editing by Tom Christley

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World economic summit planned for Nov. 15, Leaders to discuss how to solve crisis. News from WASHINGTON — World leaders, facing financial markets in turmoil and the possibility of a global recession, plan to discuss ways to fix the crisis at a summit in Washington next month.

U.S. and European leaders, sparring over the causes of the credit crunch and how to cure it, don’t expect to reach consensus on what steps to take. Instead, the Nov. 15 summit may produce only an agreement to hold additional meetings.

“Everybody will come with their own ideas,” White House spokeswoman Dana Perino said. “Not everybody will have the same solution.”

President George W. Bush, responding to calls from French President Nicolas Sarkozy and British Prime Minister Gordon Brown, invited leaders from the so-called Group of 20 industrialized and developing nations to attend the summit almost two weeks after the U.S. presidential election.

The summit is to bring together leaders of Japan, Britain, France, Germany, Italy, Canada, the United States, China, Brazil, India, Russia, South Korea and other major economies.

Perino said the White House would seek input from the winner of the U.S. presidential election, who will take office Jan. 20.

The collapse of the housing market in the United States led to the tanking of the broader financial system, prompting a credit freeze in this country and around the globe.

So far, though, a string of drastic actions by the Federal Reserve and the Bush administration has yet to turn around the economy.

Businesses are reluctant to hire and boost capital investments, consumers have hunkered down, and all the economy’s problems are feeding off each other.

World economic summit planned for Nov. 15, Leaders to discuss how to solve crisis. News from WASHINGTON — World leaders, facing financial markets in turmoil and the possibility of a global recession, plan to discuss ways to fix the crisis at a summit in Washington next month.

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Economic Indicators in U.S. Surprisingly Rise as Federal Reserve unfreezes credit markets. News on Oct. 20 - The index of U.S. leading economic indicators unexpectedly rose in September, led by a surge in the money supply as the Federal Reserve pumped cash into the economy to unfreeze clogged credit markets.

The Conference Board’s gauge increased 0.3 percent after a 0.9 percent decline the prior month that was almost twice as large as previously estimated, the New York-based private research group said today. The index points to the direction of the economy over the next three to six months.

Credit tightened further this month making it even more difficult for consumers and businesses to borrow. Fed Chairman Ben S. Bernanke today warned that the economy would probably slow for “several quarters” as spending and business investment weakened.

“October’s index will plunge,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, who correctly forecast the gain. The index “is consistent with recession, and it has not hit bottom yet.”

The leading index was forecast to decline 0.1 percent, according to the median of 53 economists in a Bloomberg News survey. Estimates ranged from a drop of 0.6 percent to a gain of 0.5 percent.

Stocks Rise

Stocks maintained gains following the report, reflecting a drop in global money-market rates. The Standard & Poor’s 500 index rose 2% to 959.6 at 10:50 a.m. in New York. Treasury securities were little changed.

The measure decreased at a 2.5 percent annual pace over the past six months. A decline of around 4 percent to 4.5 percent at an annual pace is one signal a recession is imminent, according to the Conference Board. The gauge met that requirement in January, when it dropped at a 4.7 percent pace.

“The extreme volatility in the financial market, and the near freeze-up of credit, will no doubt weaken the economy further,” Ken Goldstein, an economist at the Conference Board, said in a statement. “Data on hand reflect a contracting economy, but not one in free fall.”

Six of the 10 indicators in today’s report contributed to the gain. In addition to the money supply and interest-rate spread, consumer expectations, supplier deliveries and orders for capital and consumer goods, were positive.

Growing Pessimism

The jump in consumer expectations was already reversed this month. The Reuters/University of Michigan’s preliminary October sentiment index last week showed Americans’ outlook on the economy sank. Overall confidence dropped by the most on record.

A drop in building permits, an increase in jobless claims, a drop in stock prices and a decrease in manufacturing hours were negative factors in the leading index.

Economists surveyed by Bloomberg in the first week of October anticipated the economy contracted at a 0.2 percent annual pace last quarter and will shrink at a 0.8 percent pace in the last three months of the year. Declines in consumer spending will tip the economy into a recession, the survey showed.

“Incoming data on consumer spending, housing and business investment have all showed significant slowing over the past few months, and key determinants of spending have worsened,” Bernanke said today during testimony before Congress. “The pace of economic activity is likely to be below that of its longer-run potential for several quarters.”

Endorses Stimulus

Bernanke, broke with the Bush Administration, and endorsed consideration of a second fiscal stimulus package.

The housing slump is showing no indication of abating. Building permits, a sign of future construction, dropped 8.3 percent in September, matching the lowest level since 1981, and single-family home starts fell to a 26-year low, the Commerce Department reported last week.

The U.S. has lost 760,000 jobs so far this year, and the jobless rate held at a five-year high of 6.1 percent in September. More job cuts are on the way.

Danaher Corp., the maker of Craftsman tools and Tektronix measuring devices, said last week it plans to eliminate 1,000 jobs and close 12 factories. Lawrence Culp, chief executive officer of the Washington-based company, said in a conference call Oct. 16 that the steps were taken to “get ready for what may come” as the U.S. economy falters.

The Standard & Poor’s 500 index averaged 1217 in September, down from 1281.47 in August. Stock prices this month are down even more. The index averaged 1,001.38 during the first 17 days of October.

Coincident Index

The index of coincident indicators, a gauge of current economic activity, dropped 0.5 percent, the biggest decline since August 2005, after no change in August.

The index tracks payrolls, incomes, sales and production, which, combined with gross domestic product, are the figures used by the National Bureau of Economic Research to determine whether a recession has begun. The measure peaked one year ago, which is why some economists anticipate the group will eventually announce an economic contraction started in late 2007 or early 2008.

The gauge of lagging indicators decreased 0.2 percent. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

Economic Indicators in U.S. Surprisingly Rise as Federal Reserve unfreezes credit markets. News on Oct. 20 - The index of U.S. leading economic indicators unexpectedly rose in September, led by a surge in the money supply as the Federal Reserve pumped cash into the economy to unfreeze clogged credit markets. What do you think about this news. Is it helpful?

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Japanese shares tumbled Thursday, sending the Nikkei 225 Average down by nearly 9% in the afternoon as investors sold off equities, fearing the impact of a U.S. recession and a slowing global economy.

Nikkei down nearly 9% as recession fears kick in: News from HONG KONG - Japanese shares tumbled, sending Nikkei 225 Average down by nearly 9%.  The Nikkei 225 Average dropped as much as 10.3% in mid-morning Tokyo trading, before recovering, as shares across the board were slammed after Wall Street stocks dived overnight. The benchmark was recently down 8.9% at 8,699.69, while the broader Topix index shed 7% to 888.50.
In Hong Kong, the Hang Seng Index dropped 7.6% to 14,787.35, while the Hang Seng China Enterprises Index lost 9.7% to 7,127.98. On mainland China, the Shanghai Composite declined 4% to 1,915.73.
Australia’s S&P/ASX 200 index lost 6.3% to 4,027.70, with shares of resources giant Rio Tinto tumbled more than 14% in Sydney on concerns global demand for commodities was weakening.
“Certainly, the outlook is for a global recession, but you could argue that the markets’ pricing last week already reflected that,” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. “There is no reason why the world economy has to melt down. There are still some stabilizing influences, including the lowering of oil prices.”
Elsewhere, New Zealand’s NZX 50 index gave up 4.7% to 2,767.44, South Korea’s Kospi slumped 6.7% to 1,250.05, Singapore’s Straits Times index lost 6.4% to 1,928.56 and Taiwan’s Taiex shed 3.1% to 5,081.90.
Chart of JP:1804610
Cohen added it “wouldn’t be surprising” if governments in Asia decided to increase spending or introduce other stimulus measures such as tax cuts to support their slowing economies.
“I think the Asian economies are less vulnerable to financial instabilities now than they were 10 years ago,” said Cohen. With a few countries in the region running current account surpluses and accumulating international reserves, “Asia has a little more flexibility and they don’t have to fear that their financial position will crumble,” he added.
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RTP 154.27, -39.72, -20.5%) (AU:RIO: news, chart, profile) tumbled 14.2% in Sydney a day after the resources giant said the global financial crisis will force it to delay a planned sale of $10 billion of assets. The company added that China wasn’t immune to the global downturn and it may freeze capital expenditure as it reassesses commodity demand amid a looming global slowdown. See full story
Shares of regional exporters tumbled on worries about slowing global demand, with Honda Motor Co. (HMC:
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HMC 20.57, -3.28, -13.7%) (JP:7267: news, chart, profile) shedding 7.9% and Sony Corp. (SNE:
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SNE 23.43, -2.77, -10.6%) (JP:6758: news, chart, profile) losing 9.4% in Tokyo, while Hyundai Motor Co. (HYMLF:
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HYMLF 57.88, +2.74, +5.0%) lost 10% in Seoul.
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MZDAF 2.70, -0.25, -8.5%) fell 4.2%, on top of their 9.2% decline Wednesday, after the Nikkei business daily reported that U.S. automaker Ford Motor Co. (F:
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F 2.30, -0.14, -5.7%) has asked Denso Corp. (JP:6902: news, chart, profile) (DNZOF:
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DNZOF 20.21, +2.65, +15.1%) to purchase a part of its 33.4% stake in Mazda. The report added that Denso, which wants to expand business with Mazda, is likely to consider purchasing some of the stake.
Steelmakers and shipping stocks also dropped sharply on worries about global demand, with JFE Holdings Inc. (JP:5411: news, chart, profile) (JFEEF:
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JFEEF 24.61, +3.57, +17.0%) shrinking 12.9% in Tokyo and Mitsui O.S.K. Lines (JP:9104: news, chart, profile) (MSLOF:
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MSLOF 6.57, +0.85, +14.8%) losing 13.4% in Tokyo. In Seoul, Posco (PKX:
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PKX 60.79, -16.20, -21.0%) gave up 12%, while STX Pan Ocean Co. (SPNOF:
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SPNOF, , ) fell 11.2%. In Shanghai, shares of Baoshan Iron & Steel dropped 2.5%, while China Cosco Holdings Co. (CICOF:
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CICOF 0.69, 0.00, 0.0%) shed 8%.
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MFG 7.15, -0.21, -2.8%) lost 11.7% and Sumitomo Mitsui Financial Group (SMFJY:
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SMFJY 6.20, +0.49, +8.6%) (JP:8316: news, chart, profile) slumped 12.9% in Tokyo, while Macquarie Group (AU:MQG: news, chart, profile) (MQBKY:
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MQBKY 23.50, +1.65, +7.6%) lost 8% in Sydney. In Seoul, shares of Industrial Bank of Korea shed 14.9%, market heavyweight HSBC Holdings (HK:5: news, chart, profile) (HBC:
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HBC 69.99, -5.39, -7.1%) lost 3.9% in Hong Kong and DBS Group Holdings (DBSDY:
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DBSDY 37.15, -4.35, -10.5%) fell 5.5% in Singapore.
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C 16.02, -2.60, -14.0%) (JP:8710: news, chart, profile) lost 10.7% in Tokyo after the Nikkei business daily reported the banking giant is considering delaying the merger of its retail brokerage firm Nikko Cordial Securities Inc. with its corporate securities business Nikko Citigroup.
Energy-related stocks tumbled after November crude-oil futures fell as much as $4.09 to $74.54 a barrel on the New York Mercantile Exchange overnight, ending at their weakest level in more than a year. The front-month contract recently dropped as much as $1.21 to $73.33 a barrel in electronic trading.
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BHP 35.17, -7.28, -17.1%) (AU:BHP: news, chart, profile) gave up 13% and Woodside Petroleum lost (WOPEY:
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WOPEY 27.25, +1.95, +7.7%) (AU:WPL: news, chart, profile) 3.1% in Sydney. Commodity trader Mitsubishi Corp. (JP:8058: news, chart, profile) (MSBHY:
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MSBHY 34.95, -0.30, -0.8%) declined 14.7% in Tokyo, while shares of Cnooc (HK:883: news, chart, profile) (CEO:
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CEO 76.10, -14.15, -15.7%) sank 12.8% in Hong Kong.
The drop in Woodside shares came although the company announced an 84% jump in third-quarter revenue on increased production and higher oil prices.
In Asian currency trading, the U.S. dollar bought 99.79 yen, compared with 101.34 yen late Wednesday.
On Wall Street, the Dow Jones Industrial Average ($INDU:
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$INDU 8,577.91, -733.08, -7.9%) tumbled 7.9% to 8,577.91 and the S&P 500 index ($SPX:
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$SPX 907.84, -90.17, -9.0%) skidded 9% at 907.84, while the Nasdaq Composite ($COMPX:
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$COMPX 1,628.33, -150.68, -8.5%) shrank 8.5% to 1,628.33. End of Story

one thing that keeps rattling around in this old head is 2000 and the recession followed by DOW 14,000 and 1929

Totally different in so many ways but, why?

Because in 1929 they let things go too long before “stimulating” with war and money supply. We had both a rising money supply and war spending that kept the “crash of 2000-2001″ from playing out. We had a new Bear Market but, most didn’t think it was because of DOW 14,000. What they didn’t factor was that all that war spending and money supply was creating inflation of the prices of the stocks.

When adjusted for real value, it was just a rally that never reached the old high. While spread over years, it was a similar, but extended pattern of 1929.

That crash had a huge drop like we saw when the tech bubble burst and then a huge rally regaining over 50% of the loss. The 2000’s rally did even better but still not back to the old high.

Then in 1929, the rally failed and down and down and down the market went until it was down almost 90% from the peak.

We are pumping money again. Thus, instead of 90% down, I think we will not drop anywhere near that in price, but may in value eventually. Always keep that “Dogs of the Dow” chart in mind and what it looks like when you adjust for inflation.

It isn’t how far the DOW or S&P drop but how much buying power we lose.

quote:
On Monday, I said that the total cost of this bailout could scale up to $3 trillion — I just didn’t imagine it would happen by Wednesday.

We learned yesterday that the size of the bailout just tripled, from $750b to $3T. Here is the cost structure:Higher prices will hit at some point, but maybe not right away because most of that money is going into an almost bottomless hole. It is restoring “paper losses” that until they are restored isn’t really adding “real money” into the global economy.

But, because a lot of those mortgages (some say 95%) are still being paid, once a recovery starts, there will be alot of money to toss around due to how fractional banking works. I don’t know if it will be soon or not til next year or later but, that money will come back to haunt us if we don’t get cut off from our foreign lenders before then.

Are you saying we are in the late 1930s at this point?
No, early thirties if we are going to have a depression. It will last for many years if that is the case.

The problem is that we are not waiting as long as they did then and that will change the “price” but probably not the value of the markets. We will have high inflation in a year or so or, we will be cut off from foreign loans (another thing that is different) and go into hyper-inflation as the government has to print the money for all social spending instead of borrow it.

Social Security checks will double every month or so as Congress has emergency increase after increase that totally wipes out the trillions in the trust fund in a a year or less. Seniors getting $10,000 or $20,000 checks but not lasting a month.

We will still be in a depression but, it won’t be anything like the 30’s if we don’t keep this at a recession level. With debt rising hundreds of billions a month, that can’t last for too long with out our being cut off.

This rapid rise in debt has to cool soon or we will be in deeper trouble faster than most realize. We have increased debt $300 billion in 1/2 a month. it took a year to increase it a trillion this last year. I know it won’t keep up at this rate but think about it. $600 billion a month at this rate or $7.2 trillion more debt in a year.

So, we better hope they run out of “need” for fed funds pretty soon. Higher. Mortgage interest rates should ALWAYS BE AROUND 7% on a fixed 30 year loan, and savers should ALWAYS BE PAID AROUND 5.25% to 5.50% on standard savings accounts. It worked this way almost perfectly for around 5 decades from the 1930s into the 1980s. Variable interest rates are a bad thing in general. Regulation Q of the Glass Steagall Act fixed interest rates that banks and thrifts had to pay savers and this created a very stable and huge base for deposits with predictable returns with no risk.

The next 15 days should be interesting:

The most famous crash happened on October 29, 1929.

The crash on October 19, 1987, a date that is also known as Black Monday, was the climactic culmination of a market decline that had begun five days before on October 14th.

Tomorrow is Wednesday October 16th, 2008

Roughly 21 years since the last crash if we hold our financial disaster tradition.

Do the crashes come more frequently with rising inflation?
The Drudge poll is showing McCain as winning with 74%, Obama with 24%, and neither at 1%. The AOL poll is showing both dead even with 47% and neither winning with 6%. In my opinion, both are so disgusting and awful that it’s not even worth the bother to try to rate them. JUST SAY NO!
“U.S. Stocks Drop Most Since Crash of 1987 on Recession Concerns” By Lynn Thomasson

“Oct. 15 (Bloomberg) — U.S. stocks plunged the most since the crash of 1987, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the economic slump from deepening.

The Standard & Poor’s 500 Index sank 90.17 points, or 9 percent, to 907.84, with nine companies declining more than 20 percent. The Dow Jones Industrial Average retreated 733.08, or 7.9 percent, to 8,577.91, its second-biggest point drop ever. The Nasdaq Composite Index lost 150.68, or 8.5 percent, to 1,628.33. About 37 stocks fell for each that rose on the New York Stock Exchange.

“It’s absolutely trading on fear right now and uncertainty, because nobody knows yet how bad the economy is going to get,” said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion.

All 10 S&P 500 industries fell more than 6 percent today. About $1.1 trillion in value was erased from all U.S. equities. The declines came after the drop in retail sales was almost twice economists’ estimates, sending Macy’s Inc. and Dillard’s Inc. down more than 15 percent. The Federal Reserve’s index of New York manufacturing slumped to minus-24.6, a record low.”

Japanese shares tumbled, sending Nikkei 225 Average down by nearly 9%. News from HONG KONG - Japanese shares tumbled Thursday, sending the Nikkei 225 Average down by nearly 9% in the afternoon as investors sold off equities, fearing the impact of a U.S. recession and a slowing global economy.

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• World economic summit to Open Next Month, Leaders to discuss how to Fix Financial Crisis (0)
• Stock prices suffers steep losses as dire recession forecasts shake markets (0)

Another huge Dow loss. Huge Dow loss again Recession fears send indicator tumbling 733, 2nd biggest point loss ever

Bad News Again: Blue-chip indicator drubbed 733 points - 2nd biggest point loss ever - as recession fears resurface.

NEW YORK (CNNMoney.com) — Recession talk scared Wall Street Wednesday, sending the Dow Jones industrial average to its second biggest one-day point loss ever.

A weak retail sales report and dour forecasts from the Federal Reserve, coupled with sober comments from Fed Chairman Ben Bernanke, sent stocks tumbling.

The Dow Jones industrial average (INDU) fell 733 points, its second biggest one-day point loss ever, second only to Sept. 29 of this year, when the House of Representatives initially rejected the government’s $700 billion bank bailout plan.

Wednesday’s decline was equal to around 7.9%, the Dow’s biggest one-day percentage loss since Oct. 26, 1987.

The Standard & Poor’s 500 (SPX) index lost 90 points, its second-worst one-day point loss ever, also second only to Sept. 29. The loss was equal to 9%, its second biggest slide on a percentage basis since Oct. 19, 1987, a.k.a. Black Monday.

The Nasdaq composite (COMP) lost 8.5% and closed at a new low for 2008, its worst level since June 30, 2003. The decline of 8.5% was its biggest one-day percentage loss since Aug. 31, 1998. On a point basis, it didn’t rate among the 20 worst days.

The decline Wednesday equaled a loss of $1.1 trillion in market value, as measured by the Dow Jones Wilshire 5000, the broadest measure of the stock market. It was the second-biggest one-day loss ever, following Sept. 29.

“It’s stunning,” said Donald Selkin, chief market strategist at National Securities. He said Wednesday’s selloff was an accumulation of all the negatives that are overlapping.

“The poor economic reality is being reflected in the market,” he said.

The day’s news included retail sales at a 3-year low, a reading on manufacturing in the New York area at an all-time low, the Fed’s weak forecast and comments from Bernanke.

“The economy is the issue right now,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management. “It was clear in Bernanke’s speech today, in the retail sales report and in the stock market reaction.”

Ghriskey said the risk level is high now “because we don’t know the duration or the depth of an economic downturn.”

Additionally, Wall Street is impatiently waiting for the many initiatives that have been announced to start loosening up the still-sluggish credit market, a process that won’t happen overnight.

“The Fed and Treasury have thrown the entire arsenal at the problem and those things will work, but the market wants to see it work right away,” said Jim Dunigan, chief investment officer at PNC Wealth Management.

The credit market showed some signs of easing, as a key overnight bank lending rate fell. But the improvement was slowgoing and failed to reassure investors. Global markets were mostly lower.

Investors are also now dealing with the “around-the-clock-effect,” Selkin said. He said that barring some big news in the next few hours, Wall Street’s slide will send Asian markets lower, which will drag on European markets, and in turn hitting Wall Street again Thursday.

Treasury prices gained Wednesday, lowering the corresponding yields. The dollar gained versus the yen and fell against the euro. Oil and gas prices slipped, while gold prices rose.

Calling a recession: San Francisco Federal Reserve Bank President Janet Yellen said the U.S. economy “appears to be in a recession,” something many economists, but few Fed officials, have said. Yellen isn’t a voting member of the Fed’s policy-setting committee this year but is nonetheless seen as influential. (Full story)

Federal Reserve Chairman Ben Bernanke, speaking in the afternoon, said that while policymakers now have the tools they need to fix the financial and credit markets, the economic rebound will take time. (Full story)

The Fed’s ‘beige book’ reading on economic activity, released in the afternoon, showed weakness in all 12 districts. The outlook was also pessimistic, with businesses unable to access much-needed credit.

The lack of available credit has punished the already weak economy, making it difficult for businesses to function on a daily basis and for consumers to get loans.

“The market seems to be waking up to the fact that we’re in a recession,” Dunigan said.

He said he’s not clear as to why this is a surprise to the market, as the recession has been well forecasted by economists, if not the Federal Reserve and National Bureau of Economic Research, which officially “calls” a recession. However, he said that it may be that since the government and world banks have addressed the worst fears about the credit crisis, investors are now returning the focus to the broad economy.

Better-than-expected quarterly results from Intel, Coca-Cola, Wells Fargo, JPMorgan Chase and a host of regional banks had little impact amid worries about a recession.

Wall Street’s lack of confidence: Although investors have welcomed many of the steps the government and world banks have taken to get money flowing again, investors remain skittish. That’s partly because a lot of the programs won’t kick in until several months from now.

“After all the damage that’s been done, it’s going to take a while for people to feel confident again,” said Joseph Saluzzi, co-head of equity trading at Themis Trading..

Stocks rallied sharply Monday, with the Dow up 936 points or 11.1%, its best one-day point gain ever and best one-day percentage gain since 1933. The advance was fueled by bets that the United States would follow Europe in pouring money directly into banks in exchange for shares, as part of the $750 billion bailout plan.

But investors took a “sell the news” approach Tuesday after the government detailed plans to invest at least $250 billion in the nation’s banks. The Treasury said it will start by investing $125 billion in nine leading banks. (Will it work?)

On Wednesday, leaders of the Group of Eight (G8) economies said that they would hold a global financial crisis summit before the end of the year.

Last week was Wall Street’s worst ever, as the Dow capped a stunning eight-session selloff that cut 2,400 points and 22% off the blue-chip indicator. That erased $2.4 trillion in market value from the Dow Jones Wilshire 5000, the broadest measure of the stock market.

Many market pros are cautiously optimistic that Friday’s lows represent the lows of the bear market, or a bottom.

Economy: Consumer spending has remained strained, despite the drop in gas prices over the last 4 weeks.

Retail sales fell 1.2% in September, the biggest drop in three years, after falling a revised 0.4% in August. Economists surveyed by Briefing.com thought sales would fall 0.7%. Sales excluding volatile auto sales fell 0.6%, versus forecasts for a drop of 0.2%. Sales excluding autos fell a revised 0.9% in August. (Full story)

The September Producer Price Index (PPI), a measure of inflation at the wholesale level, fell 0.4%, in line with forecasts and reflecting the decline in energy prices. PPI fell 0.9% in August. So-called core PPI, which strips out volatile food and energy prices, rose 0.4% in September, versus forecasts for a rise of 0.2%. Core PPI rose 0.2% in August.

The NY Empire State index, a regional manufacturing report, slumped to negative 24.6 from negative 7.4 in the previous month. Economists thought it would fall to negative 10. Any negative reading shows weakness, while a positive reading shows growth.

Late Tuesday, the government said the U.S. budget deficit swelled to $454.8 billion, the highest level in history.

Earnings: A number of companies reported better-than-expected quarterly results late Tuesday and early Wednesday, including a slew of banks.

JPMorgan Chase (JPM, Fortune 500) surprised investors Wednesday morning by reporting a profit versus expectations for a loss. But the company’s net income plunged 84% due to charges connected to its purchase of Washington Mutual. It also took $3.6 billion in writedowns related to bad mortgage bets. Shares fell 2%. (Full story)

Wells Fargo (WFC, Fortune 500) posted weaker profit on writedowns and credit losses, but results were better than expected. The bank said it expects to complete its $11.7 billion purchase of Wachovia by the end of the fourth quarter. Shares rose 2%. (Full story)

JPMorgan and Wells Fargo have fared better than many of their peers in the credit crisis. Still, the two banks are among the nine that will participate in the Treasury plan.

Late Tuesday, Intel (INTC, Fortune 500) reported higher quarterly earnings that edged estimates on higher revenue that was short of forecasts. The chipmaker also reported a bigger-than-expected rise in gross margins, a key measure of profitability. Shares fell 1.5% Wednesday.

And Coca-Cola (KO, Fortune 500) reported higher quarterly earnings that beat estimates on higher sales that missed estimates. Coke’s Wednesday morning report followed Pepsi’s weaker results Tuesday. Coke shares gained 3% Wednesday.

JPMorgan, Intel and Coke are all Dow stocks. But Coke was the only gainer among the 30 Dow components.

The Dow’s biggest losers were financial components American Express (AXP, Fortune 500) and Citigroup (C, Fortune 500), and energy components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

Third-quarter earnings are currently on track to have fallen 9.8% from a year ago, according to the latest estimates from Thomson Reuters.

After the close Wednesday, eBay (EBAY, Fortune 500) posted a higher-than-expected quarterly profit, but warned fourth-quarter results won’t meet forecasts. The stock slid 5.5% in extended-hours trading.

Credit market: Some bank lending indicators improved, in a sign that the recent global initiatives to get money flowing again may be starting to work. (Full story)

Libor, the overnight bank-to-bank lending rate, fell to 2.14% from 2.18% Tuesday, according to Bloomberg.com.

The three-month Libor, what banks charge each other to borrow for three months, fell to 4.55% from 4.64% Tuesday.

The Libor-OIS spread, a measure of cash scarcity, decreased to 3.35% from 3.39% Tuesday and a record high of 3.67% Friday.

The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, widened to 4.37% from 4.30% late Tuesday. The spread hit a record 4.65% Friday. The wider the spread, the more reluctant banks are to lend to each other.

Treasury prices rallied, lowering the yield on the 10-year note to 3.97% from 4.07% late Tuesday. Treasury prices and yields move in opposite directions.

But the yield on the 3-month Treasury bill, seen by many as the safest place to put money in the short term, fell to 0.20% from 0.25% late Tuesday, showing investors were still willing to take a meager return on their money rather than risk it on stocks. Last month, the yield on the 3-month bill skidded to a 68-year low around 0%.

Other markets: U.S. light crude oil for November delivery fell $4.09 to settle at $74.54 a barrel on the New York Mercantile Exchange, a more than 13-month low. Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11.

Gasoline prices fell another 3.8 cents overnight, to a national average of $3.125 a gallon, according to a survey of credit card activity by motorist group AAA. It was the 28th consecutive day that prices have decreased - in the past month alone, they’re down more than 73 cents a gallon.

COMEX gold for December delivery fell 50 cents to settle at $839 an ounce.

In currency trading, the dollar rose against the euro and fell versus the yen.

Another huge Dow loss. Huge Dow loss again Recession fears send indicator tumbling 733, 2nd biggest point loss ever. Bad News Again: Blue-chip indicator drubbed 733 points - 2nd biggest point loss ever - as recession fears resurface.

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EU chiefs confront markets crisis: The 15 eurozone leaders are to meet in Paris to try to establish a common approach to the financial crisis. The past week has seen huge losses on global stock markets.

France’s finance minister said their meeting would “follow up and execute upon” a five-point plan agreed by the group of seven industrialised nations.

Christine Lagarde said the summit would put “meat” on the plan’s “skeleton”.

Earlier, the head of the International Monetary Fund (IMF) warned the world’s financial system was teetering on the brink of systemic meltdown.

Dominique Strauss-Kahn said rich states had failed to restore confidence, but endorsed the new action plan by the G7 group and said the IMF was ready to lend to countries in dire need of capital.

Both officials were speaking in Washington after meetings of the IMF and G7.

Intensifying concerns

France, Germany and Italy have already signed up to some key objectives agreed by the G7 on Friday.

Many commentators welcomed the aims but called for a rapid move to fill in the details, says the BBC’s economics correspondent Andrew Walker.
 
German Chancellor Angela Merkel in eastern France on 11 October 2008
[We must] redirect the markets so that they serve the people, and not ruin them
Angela Merkel,
German Chancellor

Peston: Global fix needed
Q&A: Why the big market falls?
Timeline: Global credit crunch

Ahead of Sunday’s eurozone meeting, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would present a number of proposals to ease the credit freeze that has caused the collapse of several leading international banks.

But after meeting in Paris on Saturday, the two leaders said the summit would not result in a joint financial rescue fund for Europe, in the model of a recent $700bn rescue by the US government.

Chancellor Merkel said governments must “redirect the markets so they serve the people, and not ruin them”.

UK Prime Minister Gordon Brown is due to hold talks with Mr Sarkozy ahead of the eurozone summit, having promised Britain will “lead the way” through the global financial crisis.

As the UK has not adopted the euro, Mr Brown had not been due to take part in the meeting of eurozone leaders but a Downing Street spokesman said the French president had invited him to attend part of it.

The heads of the EU’s four biggest economies - Britain, France, Germany and Italy - held a first crisis summit last week, but were split over the need for a common plan.

Meanwhile the British finance minister, Alastair Darling, has said more information about UK proposals will be made public soon.

Dominique Strauss-Kahn, Washington, 11 October 2008
Strauss-Kahn said rich nations had so far failed to restore confidence

His announcement came amid reports the British government was about to take substantial stakes in several banks.

Analysts say another week of plunging stock markets has focused minds and the real test of this weekend’s scramble by world leaders to shore up the international financial system will come once markets reopen on Monday.

In a separate development, Australia has announced it will guarantee all bank deposits for three years.

Prime Minister Kevin Rudd said his government would also guarantee wholesale funding to Australian banks in an attempt to shore up the ailing financial institutions.

Containable crisis?

Mr Strauss-Kahn was speaking in Washington after talks with US President George W Bush, G7 finance ministers and the World Bank.

Earlier, G7 ministers had released the five-point plan to free up the flow of credit, back efforts by banks to raise money and revive the mortgage market.

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George Bush says the US will lead the response to the crisis

“Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown,” said Mr Strauss-Kahn.

He later told a news conference: “The first co-ordination between advanced countries and the rest of the world is now on track.”

The IMF chief’s strong words reflect a belief that the global financial crisis can be contained, says our correspondent Andrew Walker.

Mr Strauss-Kahn was joined at the White House by finance ministers from the US, Canada, France, Germany, Britain, Italy and Japan, as well as World Bank President Robert Zoellick.

Following talks with the economic leaders, Mr Bush also pledged co-ordinated action, saying it was serious global crisis that demanded a serious global response.

The meeting came a day after Asian, European and US markets continued to panic sell despite rate cuts and cash injections by central banks, amid widespread fears of a global recession.

Late on Friday, US Treasury Secretary Henry Paulson said the US planned to invest directly in banks for the first since the 1930s, following a similar UK programme of partial bank nationalisation.

The G7 had earlier not ruled out adopting another part of the British plan - to guarantee borrowing between banks - as they issued their plan in Washington.

The G7 also left the door open to further reductions in interest rates, which six central banks this week jointly cut by half a percentage point.

EU chiefs confront markets crisis: The 15 eurozone leaders are to meet in Paris to try to establish a common approach to the financial crisis. The past week has seen huge losses on global stock markets. Editing by Emma Charles

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Fund companies Turn To Treasury Guaranty: Fifteen of the largest money-market mutual fund companies, which together account for three-quarters of the market, said this week that they would take up the Treasury Department on its offer of a temporary guaranty in an attempt to regain their status as one of the safest places to park cash.

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*  Strap In for an Extended, Slow Recovery
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*  Funds Turn To Treasury Guaranty
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None of the funds are in danger of going under, the fund companies say. Fund managers are turning to the guaranty program as a way of boosting investors’ confidence, which was badly shaken by recent turmoil at two established competitors.

The guaranty program, slated to last three months initially, covers fund holdings of taxable and non-taxable funds as of Sept. 19. Any investment made after that is not covered and neither is money that was lost in the closure of a fund before Sept. 19, the day federal officials unveiled the program.
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The federal intervention has provided enough encouragement to help slow the exodus of investors. During the week of Sept. 23 — when concern about the funds was high — $263 billion flowed out of institutional money-market mutual funds and $30 billion more leaked out of retail funds, said Connie Bugbee, who tracks mutual funds for iMoneyNet in Westborough, Mass. By comparison, last week, institutional fund investors pulled $18.4 billion and retail investors $5.64 billion.

The guaranty program may be less help to those considering investing in money-market mutual funds. Analysts say the investments are safe despite the recent upheaval, especially compared with the bleak performance of stocks. But plain, vanilla savings accounts and CDs may be a better a deal. They offer a higher return and are backed by the Federal Deposit Insurance Corp. As a result of the $700 billion bailout package, the FDIC will insure deposits of up to $250,000 through Dec. 31, 2009. After that, the FDIC insurance on bank, credit union and savings-and-loan accounts will return to the standard $100,000.

Until last month, investors had been running to money-market mutual funds because they offered stability and higher returns than savings accounts without locking up their money the way CDs do. Money-market mutual funds manage a total of $3.4 trillion in assets and account for about a third of mutual fund investments in the United States, according to the Investment Company Institute, an association of investment companies.

The downside of money-market mutual funds is that — except for the extraordinary measures announced last month — they are not insured by the FDIC the way bank deposits are. What made them a safe haven for investors was that they typically invest in low-risk and short-term securities. For that reason, analysts still consider them extremely safe.

The recent turmoil was an anomaly, said Greg McBride, a senior financial analyst for consumer finance site Bankrate.com. It started with the bankruptcy of Lehman Brothers on Sept. 15. Lehman had sold commercial paper — short-term loans companies use to run their businesses — to the Reserve Primary Fund, one of the oldest in the business. When Lehman went under, that paper was worthless and the Reserve Fund’s share price fell below $1 — an event known as breaking the buck. The Reserve Fund was only the second fund to break the buck in more than 30 years. Scared investors staged a run, and the fund was closed. That was followed by a run on a $12.3 billion fund managed by another established player, Putnam Investments, which was forced to close the fund even though it wasn’t having any problems.

Many investors are still nervous. Analysts have a few tips for those already invested in money-market mutual funds and those who are considering taking the plunge.

Check to see whether your fund is participating in the Treasury’s insurance program. You will have to call the fund or look at its Web site.

If you’re looking to park some cash in a money-market fund now, be aware that money you put in now will not be covered by Treasury’s insurance program. Look for funds that are part of large, established financial firms such as Vanguard and Fidelity that “would have the financial wherewithal to step in in the event of trouble even after the period of government guarantee,” said Lawrence Jones, senior mutual fund analyst for financial research firm Morningstar. The Reserve Fund was not part of a larger firm.

If you think you can avert another Reserve Fund debacle by incessantly scouring your fund’s holdings for potentially toxic assets, think again, said Peter Crane, president of Crane Data, which tracks money-market mutual funds. Peeking under the hood may not prove very useful, he said. You probably won’t understand what you’re looking at and the information, which is posted quarterly, is likely to be outdated since money-market mutual funds hold a lot of short-term investments.

“Money fund securities are like subatomic particles,” Crane said. “By the time you look at them, they’re gone.”

However, you should pay attention to expenses and yield. If a fund has high expenses, it has to make more money to cover them, possibly encouraging it to make riskier investments. And a higher-than-average yield could be a sign that the fund is taking more risks.

There are also money-market mutual funds that consist solely of U.S. Treasurys. But the high demand for Treasurys means a lower yield, and Treasury-only funds are not covered under the temporary insurance program.

Fund companies Turn To Treasury Guaranty. Fifteen of the largest money-market mutual fund companies, which together account for three-quarters of the market, said this week that they would take up the Treasury Department on its offer of a temporary guaranty in an attempt to regain their status as one of the safest places to park cash. Editing by Nancy Clinton

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• Stock prices suffers steep losses as dire recession forecasts shake markets (0)
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Morgan Stanley may benefit from latest Treasury plans on buying equity in banks. U.S. mulls buying equity in banks as Morgan Stanley awaits MUFJ injection. News from SAN FRANCISCO — Morgan Stanley may benefit from the U.S. Treasury’s latest plan to buy equity stakes in financial institutions as the investment bank awaits a crucial $9 billion investment from Japan’s Mitsubishi UFJ.

Late Friday, Treasury Secretary Henry Paulson said the government is developing a “standardized” program to purchase equity in “a broad array of financial institutions.”

“Such a program would be designed to encourage the raising of new private capital to complement public capital,” he explained in a statement. See related story.
Morgan Stanley (MS:
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MS 9.68, -2.77, -22.2%) was hit hard this week by concerns that the firm’s deal with Mitsubishi UFJ may not go through, or might have to be re-negotiated.
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Shares in the investment bank slumped 60% to close below $10 this week. Less than a month ago, MUFJ (MTU:
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MTU 6.65, -0.37, -5.3%) , one of Japan’s largest banks, agreed to buy 21% of Morgan Stanley, partly by buying stock in the firm at more than $25 each. The $9 billion deal is now worth almost as much as the market value of all of Morgan Stanley.
Morgan Stanley’s predicament could be eased if the Treasury agreed to complement MUFJ’s $9 billion investment by purchasing its own stake in the investment bank.
A spokeswoman for the Treasury declined to comment on specific companies on Saturday, while a Morgan Stanley spokesman didn’t immediately respond to an email seeking comment.
Vicious spiral
The collapse of rival investment bank Lehman Brothers (LEHMQ:
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LEHMQ 0.10, 0.00, -2.0%) , the largest bankruptcy in U.S. history, has triggered a much broader financial crisis in recent weeks that’s begun to limit crucial short-term funding for a wide variety of companies.
Soon after Lehman’s failure, Morgan Stanley gained approval to become a bank holding company, giving it more access to direct loans from the Federal Reserve and allowing it to collect customer deposits, a more stable source of funding.

Morgan also had a $179 billion pool of cash, government bonds and other easily sellable securities at the end of August to help it survive if outside sources of money dry up.

The Mitsubishi UFJ investment will also help bolster capital and reduce leverage. That’s also being helped by Morgan’s efforts to sell assets.

Despite all these positives, Morgan Stanley’s access to funding in private markets has dwindled, sparking worries about its future viability. Those concerns fed upon themselves last week in a vicious spiral that the firm struggled to counteract. See full story.
“The Company’s cost and availability of funding have been and may continue to be adversely affected by illiquid credit markets and wider credit spreads,” Morgan Stanley warned in a quarterly regulatory filing on Thursday. “Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers.”

Morgan said its financing needs are satisfied for 2008. But if it can’t borrow money on acceptable terms after that, the firm said it may sell equity while pursuing other ways to raise money such as collecting more deposits, according to the filing.

In September, Morgan said it used some of its $179 billion pool to support its liquidity. The firm shrank some businesses that need lots of funding, sold some assets selectively and tapped government lending programs by pledging collateral. The pool is now smaller, but still a lot larger than it was in 2007 on average, Morgan explained.
Moody’s warning
Moody’s Investors Service warned late Thursday that it could downgrade Morgan Stanley’s ratings because an extended drop in global capital markets activity will likely cut into the firm’s revenue and profit next year and possibly beyond.

The rating agency also said that customers and investors have become concerned about wholesale investment banks like Morgan Stanley. That, in turn, has put more pressure on the firm, Moody’s noted.
“Investor, counterparty and customer confidence is critical to the funding and profit generation of the firm, especially in a hostile market environment,” the rating agency said in a statement. End of Story

The following are just comments. Please leave your views afterwards:

the brokerages are starting to put astroturfers on these boards to talk about how we should be nicer and kinder to them, instead of mad.

that is an indication that we are doing our jobs well, boys and girls of the independent press! power to the people!

If that’s aimed at me Raresilk, then no I’m not but that should be obvious because it’s been my consistent line that all the banks have done this and all the brokers too rather than to excuse them. My only points are for a forum that is probably being used in the largest part for stock analysis should see the implications on all stocks in turn. This most-guilty-in-turn approach is a bad investment strategy unless you are thinking about one or two moves beyond who is in the current frame. Citi and UBS were in the absolute hole about three months ago. The only reason they are out at the moment - sort of - is because of other distractors. Then there’s tactical mistakes in stock buying when you can see the MUFG (for MS) and / or US Govt deals lining up (for a *whole* lot of banks). I don’t know what any possible dilution effects could be so that makes it tricky but a sale at a deep loss just seems like a dumb option at this point is what I’m saying.

Sad thing is this is not a Financial Crisis that should have reached this point.

May be a sign of the times with our country.

Fighting a war for five years in a small country where it should have been won in 1 to 2 years.

Letting derivative financial assets backed up by the best security in the whole world - US REAL PROPERT with IMPROVEMENTS ON IT - spread to the whole financial system and threaten a WORLD WIDE GLOBAL DEPRESSION.

Sounds like our ruling class has lost what it takes to think outside of the box and apply common sense.

More like the fall of western Roman Empire than the 1929’s and 1930’s.

I had the good luck during this long life to make money on wall street and also to spend years studying not only in the US, but also in England at the leading universities. In England many prominent academics study Marxist theories, which seem taboo in this country.

Marxist theories explain the current situation quite well, but the diagnosis is not attractive. It is the story of excess capital investment and the inevitable destruction thereof. Just ponder the fact that all capitalist theories assume that economic growth is a good—does this make sense, and is it even a practical real world assumption?How about population? We have added (and are continuing to add) 100 million people in the last 30 years. That is something I think, at a minimum, is flawed economic growth policy — to say the least.

There has been some entertainment value in watching Paulson rearrange the deck chairs on his yacht, but in the long-run historians will laugh at Bernanke and Paulson with their “TARP”

Purchasing new equity in financial firms with a “troubled asset” fund (originally “toxic assets” we thought) is advertisement itself for the stupidity and futility of the “plan”.

In the financial “Axis of evil”, along with Politicians & Wall streeters, Rating agencies deserve an equal position. It is worth pointing out that somehow they have managed to remain under the radar screen (effective lobbying???). They seem to be doing a heck of job now and are very quick in downgrading everyone but it was their support that allowed the financial fraud to prosper.

I would wish that along with the Wall streeters, and politicians, they are also brought to justice. Let’s all downgrade the rating agencies to “F” grade. You can make your own assumptions on what “F” means.

It seems to me that these so called “rating” agencies are now trying to assert their “independent thinking”, covering up their miserable failures which got us to our current situation.

Here’s a simple suggestion to stop the death spiral: tell these rating agencies to cease-and-desist all comments and ratings on financial companies for lets say, 90 days?

All these rating agencies are doing is adding fuel to the fire.
As an American I feel ashamed and guilty with the thought with my limited perspective that this crisis originated here and because of my country the whole world is getting affected like a virus spreading like crazy.

I thank people around the world for their supported willing or unwilling and I hope we Americans will save more and reduce our debt in due course of time.

I also realise no one in the world has the guts to point a finger to America’s role in this global crisis for political or diplomatic reasons and I dont blame you.
I apologise.
What’s clear from the behavior of European financial markets over the past two weeks is that the dramatic stories of financial meltdown and panic are deliberately being used by certain influential factions in and outside the EU to shape the future face of global banking in the wake of the US sub-prime and Asset-Backed Security (ABS) debacle. The most interesting development in recent days has been the unified and strong position of the German Chancellor, Finance Minister, Bundesbank and coalition Government, all opposing an American-style EU Superfund bank bailout. Meanwhile Treasury Secretary Henry Paulson pursues his Crony Capitalism to the detriment of the nation and benefit of his cronies in the financial world. It’s an explosive cocktail that need not have been.
One of the main problems with our economy is the use of leveraged products. Simply making money with basic buy-sell trades was not enough for Wall Street. Highly leveraged instruments, where your gambling profits and losses can be increased dramatically, create money out of thin air and without selling or buying any product. This is a crazy system.

With all the turmoil in the market today and the collapse of Lehman Bros and
Acquisition of Merrill Lynch by Bank of America this might be some good
advice. For all of you with any money left, be aware of the next expected
mergers so that you can get in on the ground floor and make some BIG bucks.

Watch for these consolidations in later this year:

1.) Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W R.Grace
Co. Will merge and become:
Hale, Mary, Fuller, Grace.

2.) PolyGram Records, Warner Bros., and Zesta Crackers join forces and
become:
Poly, Warner Cracker.

3.) 3M will merge with Goodyear and become:
MMMGood.

4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will merge
and become:
ZipAudiDoDa .

5. FedEx is expected to( join its competitor, UPS, and become:
FedUP.

6. Fairchild Electronics and Honeywell Computers will become:
Fairwell Honeychild.

7. Grey Poupon and Docker Pants are expected to become:
PouponPants.

8. Knotts Berry Farm and the National Organization of Women will become:
Knott NOW!
And finally…
9. Victoria ’s Secret and Smith &Wesson will merge under the new name:
TittyTittyBangBang

U.S. stocks seek financial relief from G7, Dow’s sees worst weekly drop on record; Dow Jones Industrial Average Urgent.

Morgan Stanley may benefit from latest Treasury plans on buying equity in banks. U.S. mulls buying equity in banks as Morgan Stanley awaits MUFJ injection. News from SAN FRANCISCO — Morgan Stanley may benefit from the U.S. Treasury’s latest plan to buy equity stakes in financial institutions as the investment bank awaits a crucial $9 billion investment from Japan’s Mitsubishi UFJ. Editing by Alice Lee

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U.S. stocks seek financial relief from G7, Dow’s sees worst weekly drop on record. News from NEW YORK — U.S. stocks will enter next week with investors either comforted or disappointed by the meeting of the Group of Seven finance ministers and central bankers, who have gathered in Washington D.C. to address the global financial meltdown and its implications for the world’s economies.
“I don’t know what the G7 can do exactly,” said Robert Pavlik, investment strategist at Oaktree Asset Management. “But if they can come out with a positive statement, after all this is a gathering of some of the most qualified people out there, then that will help market psychology.”
Several hours after the close of trading Friday, G7 ministers and central bank governors pledged to work together to make sure that large important financial institutions do not fail. In a brief “plan of action” released after their meeting, the G7 said that the current market turmoil calls for exceptional action.
Video: A Bad Week For Markets
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MarketWatch Editor in Chief Dave Callaway takes a look back at an awful week for U.S. equities, and a look ahead at what may lie in store for investors. (Oct. 10)
At the top of the list were unfreezing credit and money markets, ensuring banks can raise capital from the private sector, ensuring that deposit insurance regimes were robust, and repairing secondary mortgage markets where appropriate. See full story.
Also after the G7 statement, Treasury Secretary Henry Paulson gave some new details of the emerging plans by the federal government to inject capital directly into a “broad array” of financial firms.
That still may fall short of the wishes of some market veterans such as Ed Yardeni, president of Yardeni Research, whose dream scenario included central banks setting up a facility to intermediate the nearly frozen inter-bank funding market.
Chart of $INDU
But ahead of the G7 statement, Yardeni also expressed hope that the market’s meltdown was nearly over.
“Of course, no one can tell how much longer or how much worse the panic selloff will be,” Yardeni wrote in a note. “The best case scenario is that the capitulation and revulsion phase of this extraordinary global bear market [climaxed Friday].”
Market meltdown
With bank-to-bank lending and credit markets virtually frozen, Wall Street joined a global market rout that lasted for eight straight sessions. Over the past week alone, the Dow Jones Industrial Average ($INDU:
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$INDU 8,451.19, -128.00, -1.5%) lost nearly 1,900 points, or 18.2%, its worst weekly drop on record.
With Asian markets tumbling Thursday night, the Dow fell nearly 700 points upon Friday’s open to trade below the 8,000 market for the first time in more than five years.
Video: Bank Earnings Could Pound Markets
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Banks have a golden opportunity with earnings to get everything off their balance sheets, says Russ Koesterich of Barclays Global Investors. He says write-downs could have a long way to go. Stacey Delo reports. (Oct. 10)
But in extraordinarily volatile conditions that saw the blue-chip average swing back and forth by more than 500 points, the Dow settled down only 128 points at 8,451. The S&P 500 index ($SPX:
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$SPX 899.22, -10.70, -1.2%) finished down 10 points at 899, while the technology-heavy Nasdaq Composite (COMP:
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COMP 1,649.51, +4.39, +0.3%) managed to eke out some gains, ending up 4 points at 1,649. See Market Snapshot.
The weekly tallies still tell the tale. The Nasdaq fell 15.2%, its fourth worst weekly loss on record, while the broad S&P 500 index also lost 18.2%, its worst weekly drop since 1933.
For the year so far, the S&P 500 has fallen 38.8%, its worst weekly decline since 1937.
Several analysts were encouraged by Friday’s rebounding action and said that the market may have reached capitulation, when fear and selling reach an apex and a low is made which allows the market to rebound.
“I’m more convinced now than ever that this market has made a bottom. The capitulation came when we breached 8,000,” said Peter Cardillo, chief market economist at Avalon Partners. “It doesn’t mean we can’t go back and revisit that level.”
Oil slides
In an ominous sign that investors expect a global recession, crude oil prices plunged 17% on the week, to finish at a more than one-year low below $78 a barrel. While the action could bring relief to consumers and businesses, the cause of the drop for now seemed more ominous than its implications. See full story.
Not every market analysts was convinced that Friday’s action would signal a rebound. “There’s a little bit of buying going on,” said Paul Nolte, director of investments at Hinsdale Associates. “But is it over? We won’t know for a couple of months,” he said.
“The market is cheap if you look over 5 years, the problem who knows what will happen next week. There’s nothing to say this market is not going to get much cheaper.”
Many analysts say that among their biggest concern remains frozen credit and interbank lending, which have prevented everything from small firms to large institutions from conducting their business.
While the cost of borrowing dollars overnight fell Friday, a key three-month rate continued to rise amid chronic tightness in global money markets. The London interbank offered rate, or Libor, for overnight dollar loans tumbled to 2.46875% from 5.09375% Thursday. But three-month dollar Libor rose to 4.81875% from 4.75% on Thursday.
“It’s about the banks becoming more confident and bringing Libor down,” said Oaktree’s Pavlik.
Earnings
As U.S. investors still try to gauge how deep an economic recession at home and abroad might be, they will look out for any outlooks from key companies reporting quarterly results next week.
On tap will be Intel (INTC:
Intel Corporation
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INTC 15.19, -0.41, -2.6%) , Johnson and Johnson (JNJ:
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JNJ 55.85, -1.73, -3.0%) , and PepsiCo (PEP:
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PEP 57.80, -1.72, -2.9%) Tuesday; JP Morgan Chase (JPM:
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WFC 28.31, +1.06, +3.9%) , Coca Cola (KO:
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KO 41.50, -1.80, -4.2%) and eBay (EBAY:
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EBAY 16.73, +0.77, +4.8%) Wednesday; Merrill Lynch (MER:
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MER 15.75, +2.43, +18.2%) , IBM (IBM:
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IBM 87.75, -1.25, -1.4%) , Google (GOOG:
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SLB 60.50, -0.05, -0.1%) on Friday. End of Story

The following are just comments. Please leave your views afterwards:

when it’s time to destroy, he goes it alone. When it’s time to clean up and repair, he’s all about the community.

If you are talking about the President, I will remind you that Iraq dified 27 or so UN sanctions. They were shooting at our air force jets in violation of the treaty of the first Gulf war. All good reasons to have the UN do the job, but they did not, nor were they willing.
These clowns are way behind the eighth ball. Timing is everything and the damage has already been done.

One more thing. In the name of national interest, do you think these clowns will work together this time? I say, fire them all.
Why isn’t ‘the rescue that works’ just letting the world markets correct so we can then “invest” with confidence? If that is even possible anymore?

The governments of the world by propping up assets with little or no value, are ripping off taxpayers and creating even more global debt, and will make that final crash that much harder and longer.

This is exactly what they did that prolonged the Great Depression.
Get out of the way politicians - let the markets find a bottom fast.
The sad part is that the politicians are talking about (in fact acting as well) punishing corporate executives but themselves.

I say, put the guilty politicians and the corporate executives on trial SIMULTANEOUSLY. How about starting with Barney Frank?
We thought Last Week was a Roller Coaster….we haven’t even begun to climb the first Hill yet…

The fact that they really dont know what to do, and cant even present themselves well enough to “fake it till they make it” will be plenty enough for the Mice and Elephants to scatter….stepping on / bumping into / trampling each other next week when the market re-opens.

7K here we come….Be ready….get your plan of action together this weekend…and hold on tight!

The talking heads on CNBC talk about LIBOR alot like a siver bullit. If wordwide everything is slowing down and the consumer doesn’t need debt,and upside down in home loans—will lowering the LIBOR rate and banks lending to one another just help the economy $$ flow–but not the one fix that stock market is looking for?
“We won’t know if the G7 statement was enough until next week, when the finance ministers have conferred with their heads of state and legislatures to draw up their own specifics. If they act quickly, the markets will probably calm down. But if they dawdle, the crisis will only intensify.
–Rex Nutting, Washington bureau chief”

The above is a quote from a related Marketwatch article. The thrust of that article errs by forgeting that it was the genius Alexander Hamilton, the first U. S. Treasury Secretary under the genius President Washington who invented the Federalist Banks, that now has the last laugh. The private banking system of today resulted from President Jackson’s deliberate destruction of the Federalist Banks; since that time, one money panic calamity after another has ensued, including the Great Depression; the current notion of nationalizing the private banks being undertaken by England and considered by America moves back toward the Hamiltonian concept, not the Marxist concept as stated in the above article!!

Moreover, the only action that will save the world from a Recession at this G-20 meeting is if the U. S. and Japan agree to immediately reduce their Central Banks interest rate to 0.0%, so that all other Central Banks in the world can reduce their interest rates by at least 1% about two weeks later; this action would generate huge numbers of desperately needed jobs all over the world so that people can afford to buy the goods they produce. Otherwise, the dialectic of the genius Karl Marx will rear its head again just as it did when the Great Depression was created by the U. S. FRB repeatedly raising U. S. interest rates in order to protect the U. S. Dollar.

Why hasn’t Paulson, Bernanke, and Bush advocated the above solution today? They are afraid that the U. S. Dollar will fall back to 71.25 “floor”!! The recent timid drop in the Fed Funds Rate of 0.5% by the FRB was obviously too little too late!! They are gambling that their approach of “Rome burned while Nero fiddled.” will work this time. What a joke!! The Gold market will not wait on His Majesty!!
If rates go to zero…Karl Marx becomes an “investment banker” with real estate holdings, we re-invent wall strasse with Krystallnacht and turn time square into a towering inferno with a friendly group of unemployed college degree street people in a soup kitchen feeding all our 3rd world immigration BROS… all carrying GUNS!!!

Sounds like a plan!
I’m agree with you guys that 7,000pts is critical support for the DOW as it’s Primary trend support level. Though, from my personal feeling, I think it won’t hold cuz the world has yet fully price in the recession. If you look at Baltic Dry Index, this thing has fallen from 15,000pts to primary trend support at 3,000pts. Sadly, it already breached that level and fell sharply on Friday 11% more. I see oil is coming down to $40 as well. Don’t talk about U.S. earnings multiple but you should think about Book Value. I think it’s much more conservative. Right now, the DOW is trading at somewhere around 2.6 times Fwd P/BV multiples. Pacific rims is already trading at around 1 time BV of its own. All things count, I think DOW will eventually come to 3,000 to 4,000 level. I’m a chartist; but I do respect fundamental since the chart doesn’t tell you whether the company will go bankrupt or not. Did you know??? Moscow market halt-traded 12 times last week, Jakarta closed market since Wednesday and will open again on Monday. Nikkei, Thailand, Iceland halt-traded last week as well. Next week, I see VIX is going the same way as OIL flirted to $147 a barrel. I see more force-selling is coming cuz margin account will be asked to sell theri stuff given that DOW already fell somewhere around 50% from high. If they decided to pour money in to maintain their position; other who can’t afford to do so will sell their shares. Im not pessimistic; but that’s the reality that happened in ASIA last week and I suspect that will happen in the U.S. as well. I’ve been visit this site quite a while already; but never post any thing down then saw both of you want to go for bargain so just drop by to forewarn you guys. It’s just my personal opinion; hope this board will give me a warm welcome. Safe trades to all….^_^
The creation and collapse of the sub prime loan market has caused grave damage to our economy as well as the worldwide economy. The problem did not arise overnight, but if the clear warnings of the coming disaster had been heeded a year or two earlier, this disaster could have been averted. Here is the list of the Senate and House Legislative committees that are responsible for the “failed economic policies” that Obama likes to bring up over and over and over. The chairman(woman) of each committee and sub committee decides what will be discussed, what will be voted on and what will be ignored. Can you detect what these people have in common?

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Financial Crisis on world stage: Bush and global financial leaders vow to fight the growing financial meltdown. News from NEW YORK — World leaders, warning of a global economic downturn, pledged Saturday to work together to find solutions to what is unfolding as the worst financial crisis since the Great Depression.

President Bush and finance officials from the Group of Seven, Group of 20 and the International Monetary Fund - gathering in the nation’s capital - vowed vigilance in helping economies around the world on the road to recovery.

Concerns about the solvency of banks and financial institutions in recent weeks “had pushed the global financial system to the brink of systemic meltdown,” said Dominique Strauss-Kahn, IMF managing director.

Strauss-Kahn said steps taken so far by the United States and European nations hadn’t been fully effective and that more would be necessary in “the coming months.”

For his part, President Bush did not announce any new actions to stem the financial panic gripping the world, but reiterated measures world leaders are taking to strengthen financial systems.

“We recognize that the turmoil in the financial markets is affecting all our citizens,” Bush said early Saturday morning. “All of us recognize this is a serious global crisis that requires a serious global response for the good of our people.”

Both Bush and U.S. Treasury Secretary Henry Paulson spoke about the latest step being contemplated by the United States - injecting much-needed capital into banks.

“In recent weeks, financial market turmoil intensified throughout the world and credit markets froze, causing a chain reaction resulting in non-financial companies experiencing difficulty in financing normal business operations.” Paulson told an IMF meeting.

The Bush administration is considering whether to use the authority granted in the $700 billion rescue plan enacted on Oct. 3 to take ownership stakes in financial institutions to stabilize and restore confidence in them.

Other countries are also taking action to inject liquidity, protect citizens’ savings and strengthen financial institutions in their own nations, he said.

Finance leaders from the world’s top economies, the Group of Seven, pledged Friday night to take steps to keep leading institutions afloat, unfreeze credit, ensure banks have enough capital to kick start lending and safeguard depositors’ funds and restart the secondary markets for mortgages and other securitized assets.

Bush said that it is vital that countries work together so that their actions don’t undermine others. He pointed to the emergency interest rate cut enacted this week as an example of a coordinated effort.

He plans to expand discussions beyond the G-7 ministers - representing the United States, Britain, Canada, France, Germany, Italy, and Japan - to the leaders of the G-20 emerging market and industrialized nations.

“We’re in this together, we’ll come through this together,” the president said.

But Bush warned that it will take time to see the results. So far, all the measures world leaders have taken have done little to calm jittery markets. “The benefits will not be realized overnight,” he said.

Bush made a surprise visit Saturday at a G-20 meeting of finance ministers and central bankers.

Officials of the G-20 issued a statement late Saturday saying that the “global implications” of the crisis required international cooperation.

The G-20 is made up of rich and emerging nations that produce 90 percent of the world’s economic output. The meeting in Washington came at Paulson’s request. Federal Reserve Chairman Ben Bernanke was also in attendance.
IMF backs G-7 commitment

The International Monetary Fund endorsed the G-7’s commitment to do everything possible to jumpstart the world’s economies.

The IMF’s Monetary and Finance Committee said in a statement that it “recognizes that the depth and systemic nature of the crisis call for exceptional vigilance, coordination, and readiness to take bold action.”

Strauss-Kahn of the IMF said the downturn could be worse than anticipated.

“The world economy is now entering a major slowdown as a result of the most severe shock to mature financial markets since the 1930s, adding to pressure on global economies from high prices for oil and other commodities,” Strauss-Kahn said.

The International Monetary and Finance Committee - the steering arm of the IMF - began its 18th fall meeting Saturday. The 185-nation IMF was created in 1945 to coordinate international financial stability efforts, aiming to avoid financial collapses.

The World Bank, which is a similar organization with a slightly different mandate, also started its fall meeting Saturday. It focuses on longer-term aid for troubled countries, investing in such things as infrastructure development.
Week of fear

The meetings in Washington cap a week in which fear gripped financial markets worldwide. The Dow Jones industrial average had its worst week ever, falling just over 1,874 points, or 18%. Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.

Since the mid-September collapse of Lehman Brothers sparked the latest chaos in the financial markets, Bush has repeatedly tried to reassure the Americans.

“We can solve this crisis - and we will,” said Bush, in a speech at the White House Friday, his 27th commentary on the nation’s financial health. “Here’s what the American people need to know: The U.S. government is acting, and we will continue to act, to resolve this crisis and return stability to our markets,” he said.

The government has started taking a number of steps to attack the crisis, Bush said Friday. These include helping homeowners to refinance into more affordable mortgages; cutting the target for the federal funds rate; unveiling a plan to support the market for commercial paper; and offering government insurance for money market mutual funds.

The plan will authorize the Treasury to buy bad mortgage-related investments from finance companies, unfreezing the credit markets by freeing up banks and finance firms to lend once again.

Crisis on world stage: Bush and global financial leaders vow to fight the growing financial meltdown. News from NEW YORK — World leaders, warning of a global economic downturn, pledged Saturday to work together to find solutions to what is unfolding as the worst financial crisis since the Great Depression. Editing by James Smith

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