Dow falls below 10,000: What's next?

From BloggingStocks : Dow falls below 10,000: What's next?, Oct 6, 2008 11:58 am


Let it be written that on the sixth day of October in the year 2008, the irrational exuberance that defined the 1990s came screeching to a halt.

The Dow Jones Industrial Average fell below 10,000 this morning for the first time since 2004. Gosh, it seems like only yesterday that investors were as giddy as school girls when the leading stock market indicator crossed that once-unthinkable benchmark. Remember the Dow 10,000 hats? I bet the people who bought them along with other keepsakes of better times plan to unload them on eBay so they can fill up their tanks with gas. In fact, some people have already started selling bull market memorabilia. A Lehman Brothers coffee mug is available on eBay for $14.99, while the book Dow 36,000 is attracting no bidders for the bargain-basement price of $1.93.

These are lousy times. The real estate market continues to suck wind. Holiday retail sales are expected to be their worst in years. Hundreds of billions of dollars worth of federal bailouts have failed to unfreeze the credit market or provide any relief for homeowners hurt by the subprime crisis. A good part of the market's downturn can be blamed on lax corporate governance, including outrageous CEO pay.

According to the Corporate Library, former American International Group (NYSE: AIG) Chief Executive Martin Sullivan was paid $43.9 million in 2007. His pay was at or above the 90th percentile for the S&P 500. Now, the insurance giant is owned by the federal government and is in the midst of selling off its assets. The Corporate Library's Nel Minow noted in testimony before Congress today about AIG that shareholders have nothing against paying executives well. "They just don't want them to get paid a lot of money without earning it," she said in a written testimony.

As the New York Times noted on Sunday, the rich also are suffering as Wall Street continues to bleed jobs by the tens of thousands. People are putting their multi-million dollar yachts up for sale and making agonizing decisions about whether to part with the estate in the country or the swanky New York apartment, the paper said. One industry that is not hurting is strip clubs.

"Men will never grow tired of the high-class strip-club experience," said Lonnie Hanover, a spokesman for Rick's Cabaret International in New York. Rick's, which is publicly traded on the Nasdaq and has 19 clubs across the country, even plans to expand. "When times are tough, there is no better form of escapism than a night at a gentlemen's club."

Related Posts :

1. Couple Items To Look For....
2. Long Bonds, Short Equities
3. The Heartbeat Of The Stock Market Goes Thump

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Mall and Strip Center Vacancy Rates Rise Sharply

From Calculated Risk : Mall and Strip Center Vacancy Rates Rise Sharply, Oct 6, 2008 12:19 pm

From the WSJ: Mall Vacancies Grow as Retailers Pack Up Shop
For strip centers and other open-air shopping venues, the vacancy rate climbed to 8.4% in the third quarter from 8.1% in the second quarter. That marks the highest rate since 1994, according to Reis. Meanwhile, retailers' closures outpaced new leases by 2.8 million square feet in U.S. strip centers in the third quarter, the third consecutive quarterly net decline. It is the first nine-month period of so-called negative net absorption since Reis started tracking the data in 1980.
...
The vacancy rate at malls in the top 76 U.S. markets rose to 6.6% in the third quarter, up from 6.3% in the previous quarter, to its highest level since late 2001, according to Reis.


U.S. Real House Prices vs. Real Consumer Spending Click on image for larger graph in new window.



This graph shows the strip mall vacancy rate since Q2 2007. Note that the graph doesn't start at zero to better show the change.

Related Posts :

1. Couple Items To Look For....
2. Long Bonds, Short Equities

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Couple Items To Look For....

From Weather on Wall Street (Couple Items To Look For....), Oct 6, 2008 07:19 am

1987 is a "model" of how the INITIAL THRUST DOWN will "likely" proceed. In 1987, Thursday and Friday were down days....followed by a big gap lower on Monday and a "thrust" down on Tuesday. Then....the market bounced hard for 2 - 3 days....and then ROLLED OVER AGAIN at the end of October/beginning of November.

Keep in mind the intermediate term bounce in the market in 1987 will likely NOT occur here. We are dealing with VASTLY DIFFERENT MARKETS. In 1987, we were at the beggining of a SECULAR BULL MARKET that didn't end until 2000. Now....we are at the BEGINNING OF A SECULAR BEAR MARKET....that may not end for years.

But any secular bear market will have significant intermediate moves up within it.

Related Posts :

1. Long Bonds, Short Equities
2. The Heartbeat Of The Stock Market Goes Thump
3. 10/02/2008 Market Recap: Market Oversold

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Long Bonds, Short Equities

From Econompic Data (Long Bonds, Short Equities), Oct 4, 2008 11:26 am


We've looked at this in the past with our post Where's the Equity Premium?, but worth noting again. Over the past 11 3/4 years, equities have underperformed bonds in the U.S. (comparing the S&P 500 with the Lehman Brothers Aggregate Bond Index INCLUDING REINVESTED DIVIDENDS / COUPONS).


Unfortunately it is even worse from an investment point of view. Investors typically don't buy once and hold, rather they continually invest. Assuming an investor had invested $1 per month in either stocks or bonds, they would have an identical return over the past 16 YEARS!


With the earnings component of equities under pressure and the relative cheapness of U.S. Bonds, look for bonds to continue their recent outperformance in the months / years to come.

Related Posts :

1. SEC short-selling ban to expire Wednesday night
2. Fed Boosts Cash Auctions to $900 Billion, May Do More
3. BNP takes over Dutch-Belgian bank Fortis
4. Did JPM Cash Call Bring Down Lehman ?

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

SEC short-selling ban to expire Wednesday night

From Reuters (SEC short-selling ban to expire Wednesday night), Oct 3, 2008

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission announced on Friday its ban on financial stock short-selling will expire at 11:59 p.m. ET on Wednesday, October 8.

Earlier in the week, the SEC said the ban would expire three business days after a $700 billion federal bailout bill was enacted by Congress. The emergency ban was part of a series of government measures designed to restore confidence in battered markets and the ailing financial system.

Related Posts :

More Stocks You Can't Short

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Fed Boosts Cash Auctions to $900 Billion, May Do More

From Bloomberg (Fed Boosts Cash Auctions to $900 Billion, May Do More (Update1)), Oct 6, 2008 08:32 EDT

The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,'' the central bank said in a statement released in Washington today. Fed and Treasury officials are "consulting with market participants on ways to provide additional support for term unsecured funding markets,'' the statement said.

As part of today's steps, the Fed will increase its auctions under the 28-day and 84-day Term Auction Facility operations to $150 billion each. The two forward TAF auctions in November will be increased to $150 billion each, the Fed said.

The central bank will also begin paying interest on bank reserves. Payments on required reserves will be made at the average targeted federal funds rate established by the Federal Open Market Committee over each reserve maintenance period less 10 basis points.

The Fed gained the authority to pay interest on reserves under the $700 billion financial-rescue legislation approved last week.

In a separate statement, the U.S. Treasury said it is considering changes to its debt issuance, including a reintroduction of three-year notes. Any changes will be released at the department's quarterly refunding announcement Nov. 5.

The Treasury also said today that some cash-management bills may be "longer-dated.'' The expansion in debt sales is needed to "allow Treasury to adequately respond to the near-term increase in borrowing requirements,'' the department said in the statement released in Washington.



Related Posts :

1. BNP takes over Dutch-Belgian bank Fortis
2. Did JPM Cash Call Bring Down Lehman ?
3. Graphic Depiction of Finance Crisis
4. Why are real interest rates rising?
5. Now CALIFORNIA Needs An Emergency Bailout
6. Federal Reserve Bank Credit Balance Swells

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.