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Dow Comes Back

By Big Tent Democrat, Section Other Politics
Posted on Mon Oct 13, 2008 at 03:42:09 PM EST
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Today was a good day on Wall Street as the Dow gained over 900 points and 11% in value:

The markets made a comeback on Monday. Last week’s stock sell-off gave way to a big rally, with the Dow Jones industrial average having its largest-ever point gain. The surge came as countries around the world took steps to ease the financial crisis, ushering in a drastic reshaping of the banking industry even as doubts lingered about its long-term effects.

. . . At the close, the blue-chip index was up more than 935 points or 11.1 percent. The broader Standard & Poor’s 500-stock index surged 11.6 percent and the Nasdaq was up about the same. Stocks in Paris and Frankfurt had their biggest one-day gains ever. The rallies came after central banks flooded the financial system with billions of dollars in liquidity, throwing out the traditional financial playbook in favor of a series of moves that officials hoped would get banks lending again.

Hard to say if this has turned the corner on the crisis. Credit markets were NOT open today. And hard times are clearly ahead for the economy. Recovering a third of your loss is not exactly champagne time. More . .

But it does raise the question why it took Paulson so long to get to this place:

European countries — including Britain, France, Germany and Spain — announced aggressive plans to guarantee loans, take ownership stakes in banks or prop up ailing companies with billions in taxpayer funds. In Washington, Henry M. Paulson Jr., the Treasury secretary, is planning to meet this afternoon with Wall Street chief executives to hash out the terms of a new round of government intervention. Washington has also announced plans to take equity stakes in banks to get them lending again.

Finally, I still see no one dealing with the homeowner crisis in this country. In my next post, I'll discuss Barack Obama's speech today.

By Big Tent Democrat, speaking for me only

< Pulling Up Powerline Quotes | Obama's Speech On The Economy >

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    Dow Comes Back | 33 comments (33 topical)

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    The stock market roller coaster (5.00 / 1) (#1)
    by andgarden on Mon Oct 13, 2008 at 03:46:52 PM EST
    How many people do you think are going to sell tomorrow morning?

    This is going to be a crazy week IMO.

    lots. but probably (none / 0) (#9)
    by coigue on Mon Oct 13, 2008 at 03:57:53 PM EST
    not 900 points worth.

    [ Parent ]
    Do you feel 11% better? (5.00 / 3) (#6)
    by Stellaaa on Mon Oct 13, 2008 at 03:55:26 PM EST


    Heh. (none / 0) (#8)
    by Robot Porter on Mon Oct 13, 2008 at 03:57:36 PM EST


    [ Parent ]
    No! I feel 100% better! (none / 0) (#13)
    by BrassTacks on Mon Oct 13, 2008 at 04:13:29 PM EST
    Had the market not rebounded, it would have been very, very, bad.  This is awesome news!  Maybe the recession/depression won't be as bad as we thought!  

    Happy Days are Here Again!  

    [ Parent ]

    I'll have what he/she is having (5.00 / 2) (#24)
    by ruffian on Mon Oct 13, 2008 at 04:28:28 PM EST


    [ Parent ]
    Rich Miller at Bloomberg ... (5.00 / 1) (#19)
    by Robot Porter on Mon Oct 13, 2008 at 04:18:36 PM EST
    cheerfully writes:

    The world may be heading for its worst recession in a quarter of a century -- if it's lucky.

    But he quotes Brad DeLong with this tepid prayer:

    ``The hope is that it won't become the worst unemployment business cycle since the Great Depression.''

    Happy Days are Here Again!

    The Markets went up because (5.00 / 3) (#21)
    by scribe on Mon Oct 13, 2008 at 04:21:22 PM EST
    Krugman won the Nobel.

    Try disproving that.

    Recovering a third of your loss? (5.00 / 1) (#31)
    by robrecht on Mon Oct 13, 2008 at 05:21:03 PM EST
    I wish.  The Dow's a third of way back to where it was in September but only about 1/6 of the way back to where it was this time last year.  And I wouldn't bet on our not retesting Friday's floor in the near future.

    "no one dealing with... (3.00 / 2) (#18)
    by SalseroDos on Mon Oct 13, 2008 at 04:17:55 PM EST
    the homeowner crisis"

    Krugman wrote this today:

    What can be done to stem the crisis? Aid to homeowners, though desirable, can't prevent large losses on bad loans, and in any case will take effect too slowly to help in the current panic.

    There is an economists view - i.e: Aid to homeowners can't help the bigger problem and it would take too long to ease the pain in the stock/financial markets.

    In short: Let them eat cake.

    While I love a lot of Kugman's political commentary and even some of his economic views such as predicting the current meltdown three years ago things like what he wrote above which, by his own admission, is clouded by his being an economist drives me crazy.

    Bizarre (5.00 / 3) (#34)
    by Steve M on Mon Oct 13, 2008 at 06:03:55 PM EST
    It's like you read the word "desirable" right out of that quote.

    Of course we can want to help homeowners while simultaneously recognizing that help to homeowners alone is not going to be enough to stem the crisis.  Where the hell do you get "let them eat cake" out of that comment?  Are we supposed to pretend that all we have to do is enact relief for homeowners and everything magically gets better?

    [ Parent ]

    I'm afraid you are the one (none / 0) (#37)
    by SalseroDos on Mon Oct 13, 2008 at 11:13:35 PM EST
    who is bizarre.

    Exactly what does desirable mean to you? It certainly isn't a plan to help homeowners. No where does Krugman says 'how to' help homeowners or that we 'should' help homeowners. He says it's desirable. Well a lot of things are desirable but that doesn't mean you are advocating a plan to get it done.

    In fact what Krugman suggested after saying desirable is helping homeowners would not help the bigger situation and even if enacted would not happen fast enough. In other words he sees no value in helping the situation by helping homeowners. Did that part of what he said go over your head?

    [ Parent ]

    Not my field (none / 0) (#29)
    by BackFromOhio on Mon Oct 13, 2008 at 05:09:49 PM EST
    but, isn't the point of helping homeowners to convert non-performing loans in default, bankruptcy, foreclosure or whatever into performing loans by dialing back the interest rate resets, enabling homeowners to make lower payments, and thus providing cashflow, albeit reduced, to mortgage holders?

    [ Parent ]
    Sure it would be (none / 0) (#38)
    by SalseroDos on Mon Oct 13, 2008 at 11:17:45 PM EST
    But where are you going to get the money? There is only so much allocated and priorities must be set and as Krugman says spending the money on mortgages would not help enough versus immediate influx of cash and any help buying mortgages would provide would not happen fast enough.

    What banks need is immediate significant cash - not trickle in cash flow from mortgage payments.

    [ Parent ]

    Whoopie Dow. (none / 0) (#2)
    by patriotgames on Mon Oct 13, 2008 at 03:48:47 PM EST
    I lost 7000 on my mutual.

    I hope you didn't sell. (none / 0) (#10)
    by coigue on Mon Oct 13, 2008 at 03:59:42 PM EST


    [ Parent ]
    Double whammy (5.00 / 1) (#30)
    by CoralGables on Mon Oct 13, 2008 at 05:16:23 PM EST
    Those that bailed out of the market last week and weren't in today, by historical standards missed a year's worth of growth in one day.

    Tomorrow...who knows.

    [ Parent ]

    At a $7000 loss?? (none / 0) (#14)
    by patriotgames on Mon Oct 13, 2008 at 04:14:08 PM EST
    Are you nuts?!!!?!?!

    I just hope it comes back up sometime soon.

    [ Parent ]

    good. (none / 0) (#32)
    by coigue on Mon Oct 13, 2008 at 05:24:53 PM EST
    some people do. They just can't stop themselves.

    [ Parent ]
    I could have bought 2 Escalades-hybrids (none / 0) (#33)
    by BarnBabe on Mon Oct 13, 2008 at 05:34:32 PM EST
    The 90's were wonderful for my 401k. September 11th took a big dive and it took a few years to recover. I figure a good 4 years at least and then it all goes to bonds. Too many roller coasters with my nest egg. The market is always a gamble, but I never ever thought I would see what has happened in the last few weeks. The US plan might have helped, but the UK bailout at 2 tril was pretty hefty.

    [ Parent ]
    Meanwhile, there's going to be (none / 0) (#3)
    by andgarden on Mon Oct 13, 2008 at 03:49:43 PM EST
    heartburn over this:

    Krugman said today he saw little danger of a move toward protectionism in the U.S., no matter which party wins in next month's elections.

    ``There may be a standstill, or slowdown at least, on new trade agreements, but I find reversal on trade agreements implausible,'' he said in remarks via telephone to a group of reporters in Stockholm. ``Full-scale protectionism I don't see.''
    The problem (5.00 / 0) (#5)
    by Socraticsilence on Mon Oct 13, 2008 at 03:55:16 PM EST
    Is that I think if we abandoned trade agreements we might get crushed, I mean I think we need to re-negotiate some, but wouldn't we bear the wrath of the WTO if we back out of say NAFTA?

    [ Parent ]
    China and Japan (5.00 / 1) (#26)
    by SalseroDos on Mon Oct 13, 2008 at 04:39:03 PM EST
    among others have protections in place so that their own country and it's people don't suffer the perils of Free Trade. But yet they still profit from Fair Trade where it makes sense.

    So yes, still being the largest consumer market in the world, which benefits other countries like China , we should renegotiate NAFTA.

    Without good paying jobs we will cease to be an attractive consumer market which would hurt those countries who are now reaping the benefits of us being the largest consumer market. It's in everyone best interest to keep America flourishing. That's means keeping jobs here.

    [ Parent ]

    Obviously we should not (none / 0) (#7)
    by andgarden on Mon Oct 13, 2008 at 03:57:30 PM EST
    But there are many very loud people who want to.

    [ Parent ]
    I guess the gamblers.... (none / 0) (#4)
    by kdog on Mon Oct 13, 2008 at 03:51:12 PM EST
    got some much-needed sleep this weekend after last weeks gambling bender and banked a win to start the week.

    Lets see what happens by Thurs-Fri, when they get re-fried and start losing their heads again.

    Credit Markets still frozen ... (none / 0) (#11)
    by Robot Porter on Mon Oct 13, 2008 at 04:07:57 PM EST
    with only minor signs of easing.

    October Surprise? (none / 0) (#12)
    by squeaky on Mon Oct 13, 2008 at 04:09:34 PM EST
    Dow goes up 3000 points and McSame claims it is because he halted his campaign for a day went to DC and fixed the economy.

    That would be a shocker. Good thing it is not likely.

    Ummmm................. (5.00 / 0) (#16)
    by BrassTacks on Mon Oct 13, 2008 at 04:17:37 PM EST
    For personal reasons, I hope that you are right about the market returning.  I would like my husband's retirement account to come back so he can retire before 75.  

    The rest of the prophecy, not so much............

    [ Parent ]

    Here is a good post (none / 0) (#15)
    by Steve M on Mon Oct 13, 2008 at 04:17:32 PM EST
    on the indicators to really watch to know if things are starting to look up.

    Today's record-breaking day doesn't really tell us much about whether credit is going to loosen in any appreciable way.  We'll know more tomorrow.

    Credit will not ease (none / 0) (#23)
    by SalseroDos on Mon Oct 13, 2008 at 04:27:21 PM EST
    until either the Treasury or the Fed guarantees every solvent banks debts. That would mean that the banks can resume lending to each other without fear of losing what they lent in the case of the lendee going belly up. It is both liquidity and inter-bank lending which is holding up the credit markets. In some cases banks have plenty of liquidity but will not lend to other banks.

    [ Parent ]
    TED Spread (none / 0) (#27)
    by coast on Mon Oct 13, 2008 at 04:45:28 PM EST
    is what most analyst have been watching as Steve M's link provides.  Guarantees of all debt of solvent banks is too drastic of a move and not necessary.  Patience has to prevail in this situation and let the bailout begin to do its job.  

    [ Parent ]
    There are many contrasting views (none / 0) (#28)
    by SalseroDos on Mon Oct 13, 2008 at 04:58:22 PM EST
    out there. We don't have the time to let the bailout alone speed inter-bank lending which is crucial and always has been to the liquidity in the markets.

    The bailout alone could take months for banks to start lending to each other again. We don't have months. In fact Secretary 'Snail' Paulson has already moved way too slow and been a step behind on everything.

    [ Parent ]

    Squeal (none / 0) (#17)
    by Stellaaa on Mon Oct 13, 2008 at 04:17:48 PM EST
    Watching CNBC is so painful.  They talk about all the things they want gov't to do for them.  The minute the Dems mention a stimulus plan for Main Street, they squeal about the deficit.  By the way, Roubini and Krugman are clear, without the element for Main Street all the other stuff will not work.  

    Krugman was clear (none / 0) (#25)
    by coast on Mon Oct 13, 2008 at 04:36:31 PM EST
    until he made the comment noted in post #18.

    [ Parent ]
    CNN interview with McCain (none / 0) (#20)
    by Stellaaa on Mon Oct 13, 2008 at 04:20:54 PM EST
    Lets see, the interviewer talking about Ayers etc, and not being more inquisitive about the economy.  Man, oh man, here is a chance to ask him what he will do about the economy, instead he talks about drivel.  

    I have been dismayed at CNN (none / 0) (#22)
    by ruffian on Mon Oct 13, 2008 at 04:27:10 PM EST
    It is scary how dumbed down they are. I hadn't watched them regularly for years, but when I gave up on MSNBC I started watching them again. That's right, even dumber than MSNBC, just not as insane.  

    Odd, because I don't think they are dumb people. Blitzer used to be pretty good. They are just playing to the lowest common denominator.

    [ Parent ]

    It was surprising (none / 0) (#35)
    by KeysDan on Mon Oct 13, 2008 at 08:25:23 PM EST
    that the Stock Exchange was open today, since it is a holiday for federal government offices.

    ok, so only (none / 0) (#36)
    by cpinva on Mon Oct 13, 2008 at 10:04:29 PM EST
    a part of the sky fell!

    We have turned a corner (none / 0) (#39)
    by Militarytracy on Tue Oct 14, 2008 at 09:11:04 AM EST
    We have some other corners to turn though yet that the markets will respond to.  We still haven't dealt with the sh*tpile and almost everybody owns a piece.  It is only worth a fraction of what it was sold thirty times as. Christmas is going to be rough compared to those of the recent past because credit comes with proof of being credit worthy.  Our economic indicators have been inflated with a lot of bull for a long time.

    Dow Comes Back | 33 comments (33 topical)

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