Markets Vote With Their Feet: Asia and Europe continue slide

While the futures point to somewhat of a bounce for the Dow, Europe and Asia have retrenched:

Nikkei 225 7,901.64 -164.15 -2.04%
Hang Seng 12,583.63 -376.14 -2.90%
Straits Times 1,704.52 -18.85 -1.09%
FTSE 100 4,024.07 -67.33 -1.65%
DAX 4,218.36 -21.49 -0.51%
CAC 40 2,883.69 -41.59 -1.45%

The Dow now stands at 7949.09, a figure first crossed in July of 1997, and a whisper above it’s pit of 2002 7850. Driving this is a sell off in financials, which was touched off by word that Obama has no fix for the banking crisis, and that internal negotiations are continuing. Plan B? We needed a plan B? This was the man who whipped for TARP with scaremongering about the down in the 9000’s. It was, as the Post notes the worst inauguration day in history for stocks.

The fuzzy vague ophoria that grips newspapers, bloggers, and celebrities, is not born out by his actual record. The disconnect between moment of public unity, backed by media blitz, and policy incompetence, is not as wide as after 9/11, because it is almost impossible for that to occur, but certainly wider than any other time in the last 30 years. Obama’s speech touched off a sell off because the words that Wall Street heard were not rebuilding and remaking but “sacrifice.” Obama is a Hooverite, about cuts and pain and pain and cuts. His new era is not about a new America, but about delivering pain. This is precisely the wrong message.

But right now Americans are only dancing between the sheets, writhing in ex-stasis – the over throw of an old state, not realizing that the man they are hailing as a savior has already made fatal blunders from which neither he, nor the economy, are likely to recover. The debt fear mongers will like Obama’s pain and sacrifice mantra, but anyone in business, has just been told not to invest one dime in new capacity, not to hire one person that can be avoided being hired, and that the only growth industry is turning Afghanis into pink mist.

The global economy, is voting no confidence in Obama, even as Americans rush headlong to praise him. If it is Obama against Depression, I will play for Team Depression. FDR took office and the slide of the banks was a punctuation mark to the incompetence of the Hoover Administration, his inaugural ushered in a new era, not just because of its rhetoric, but because it offered a policy regime: relentless experimentation, direct action, and confronting fear itself. Obama offered a policy prescription: sacrifice, hard choices, sacrifice. Sure there would be some rebuilding, and when someone else does it, Obama will be there to take credit. Wall Street looked at the soup of well turned phrases which no one can remember, and decided that they didn’t feel like being heroes.

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Stirling Newberry

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  • By Steve Goldstein

    WSJ – U.S. stock-index futures pointed to a recovery from the previous day’s selloff, with a flurry of earnings releases battling banking-sector woes for investors’ attention.

    Less than two hours before the start of trading, Dow Jones Industrial Average futures were 91 points higher at 8036. The S&P 500 futures gained 8.7 to 814.7, and Nasdaq 100 futures rose 4.25 to 1151.75. Changes in futures do not always accurately predict early market moves after the opening bell.

    Stocks dropped sharply Tuesday, with the financial sector skidding nearly 17% as investors panicked at the likelihood that banks needed more capital without an easy way to get it. The Dow Jones Industrial Average, in its worst-ever performance on Inauguration Day, skidded 332 points, the S&P 500 lost 38 points and the Nasdaq Composite dropped 88 points.

    With a lack of significant U.S. economic data to look forward to, a flurry of high-profile earnings reports are in the spotlight. AMR, UAL, and United Technologies post results, and after the close, Apple and eBay report.

    Some traders hoped positive sentiment would spill over from late Monday, when International Business Machines bucked the trend of high-tech competitors to post a 12% increase in fourth-quarter profit and give an upbeat outlook for 2009.

    But BlackRock started off the morning by posting an 84% plunge in fourth-quarter net income; shares slid 3.3% premarket.

    While earnings will attract attention, the financial sector will be back in the spotlight after the 17% dive in the sector on Tuesday. European markets fell, as bank shares took another pummeling. In Frankfurt action, Bank of America traded at $5.36 from a $5.10 close and Citigroup traded at $2.98 from a $2.80 close. Asian markets closed lower, dragged down by weakness in financials.

    Investors in the U.S. will also be watching Timothy Geithner’s confirmation hearing for Treasury Secretary. His top job will be to explain to Senators why the previous $700 billion fix of the financial sector didn’t work and more funds are required to clean up the mess.

    Continued at link …

  • The dude is trying to reflate, bail out dead institutions as you seem to advocate (which I think is a mistake–why not let them fail–their assets, if they have any, could be picked up at firesales by new or currently small solvent banks–capitialize those instead), talking about creating 3 million jobs.

    You can’t blame Obama for years of mistakes made by others.

    Excerpt from Denninger Jan. 14.

    http://market-ticker.denninger.net/archives/2009/01/14.html

    Fully aware of the mathematics of the matter – that if GDP growth is 3% but debt growth is 6% the law of exponents says that eventually the game of musical chairs will end in tears both The Executive and The Fed have desperately tried to blow bubble after bubble, knowing full well that when the last bubble bursts an enormous deflationary credit collapse must and will come crashing down upon the economy just as it did in 1929 and 1873, bankrupting tens of millions of Americans, throwing millions out of their homes and destroying hundreds of thousands of businesses.

    THAT DAY HAS NOW ARRIVED AND INSTEAD OF ACCEPTING THEIR JUST PROPORTION OF THE DAMAGE THEY ARE CRAVENLY APPEARING IN FRONT OF CONGRESS AND DEMANDING TO BE SAVED, COMPLETE WITH THEIR LEARJETS, HOMES IN THE HAMPTONS AND YACHTS WHILE EVERYONE ELSE LITERALLY BURNS IN HELL, THREATENING ECONOMIC NUCLEAR WAR IF YOU REFUSE THEIR BIDDING – AND YOU HAVE SAID “YES” INSTEAD OF JAILING THE LOT OF THEM FOR EXTORTION!

    The necessary GDP adjustment – a moderate recession – should have been taken in 1987. It was not, and instead a bubble was intentionally blown. We got the Internet Bubble.

    The necessary GDP adjustment – now about 10%, or a mild depression – should have been taken in 2000. It was not, and instead an even bigger bubble was intentionally blown. We got the Housing Bubble.

    The necessary GDP adjustment – now about 20%, or a moderate depression, should have been taken in the summer of 2007. Alarmed by the mathematics, Bernanke attempted to blow an even bigger bubble with the discount and interest rate cuts, plus manipulation of reserves and 23A exemptions. The money went into commodities but the bubble was very small and short-lived because the mathematical limits of debt in the system had been reached and by the summer of 2008 this became evident with the failure of Fannie, Freddie, Bear Stearns, Lehman and AIG, along with a collapse in the commodity, stock and credit markets.

    We are now up to a near-30% necessary correction in GDP, a SEVERE DEPRESSION, as a direct and proximate consequence of the actions taken by you, Henry Paulson, Ben Bernanke and Alan Greenspan over the previous twenty years and, more recently, the previous eighteen months.

    Fully fifty percent of the damage that HAS TO be taken was ADDED TO THE SYSTEM as a DIRECT CONSEQUENCE of your and their actions over the last year and a half!

    I did inhale.

  • He certainly seems headed in that direction.

    But I’m going to wait a while before I decide.

    Paulson already changed course a couple of times with the TARP and it could be that Obama will as well.

    Denninger suggests that instead of bailing out big insolvent banks, those banks should be allowed to fail. Everyone owning stock would lose their investment, but the truth is, they already have, and this is just recognition of that reality.

    Then stimulus could be directed to still solvent smaller banks or the creation of new banks to help get the country back on its feet.

    Depositors in failed banks are issued stock in new institutions.

    I allow myself the luxury of a tiny shred of hope.

    And then prepare for the alternative.

    I did inhale.

  • he and the Dems immediately owned the problem. Now it’s a Democratic problem, and since the Dems are fully in control of governing, whatever happens from now on will be their responsibility, and voters will hold them accountable for it in 2010 and 2012.

    The markets know this, and it looks like they’ve decided to begin exerting the strict discipline that they failed to exert previously. The pressure is on from day one. There’s no margin for error here. The Obama folks are now on notice.

  • The most recent Dow bottom is up almost 7% from Novembers bottom, pretty good for 60 days. The top at 9100 is up almost 21% from the bottom, also in about 60 days.

    earnings reports are now surprising to the upside. What else do we want? Economic collapse averted by a recapitalization of banking, same as has been done in past crises the world over. Not rocket science here.

    Energy prices are down, putting $1 Billion a day into our pockets.
    Interest rates are down as well, from 6.3% 30 days ago to under 5%, with a flood of remortgage activity.
    Banks are recapitalized, interbank lending is returning to normal
    upside surprises on earnings

    This was a fear panic as Warren Buffet described it, and is substantially irrational. When people are scared they stop, when they stop being scared they start moving again.

    We will be looking at a Dow above 10000 by July or August.

  • Is this the bottom? I don’t think so. I look at three factors, fundamentals, technical indicators, and market sentiment. I don’t think that fundamental are strong, and I don’t think that the technicals are indicating a market bottom either. Moreover, market sentiment is not showing a bear market bottom either. A bear rally is scheduled, but this is only going to be a rally in an overall bear market. The nimble can eke something out of it, but only by accepting a good deal of risk. We are still in a whipsaw market. Watch the liquidity of the short sellers rush in as the market lifts.

    But what do I know? I don’t do this for a living, nor do I play the market anymore for the fun of it.

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