Flucuating wildly again on Friday, the Dow ended down more than 300 points on
fears the rest of the world's markets are headed into recession territory.
While not as grim a decline in stock value as many analyists had predicted
today, the Dow is still down for the week and at its lowest level in 5
years.
Stocks all over the world tumbled as third-quarter earnings came
in. It's becoming increasingly obvious to many investors that the world economy
is headed for a severe downturn. Government interaction is doing little to quell concerns that the market won't be stablizing anytime soon.
Now
at just over 8,300 points, the Dow is at its worst since April of 2003. It fell
nearly 5.4% for the week. Next week is not likely to bring any relief and most
believe things will get even uglier. With the holiday season right around the
corner, recession fears and rising unemployment rates might make it a very
unhappy holidays.
Recently, President Bush's
economic advisor used the word "recession" when describing the
economic situation in several states. Many others are said to be on the
borderline of falling into recession. Here's the breakdown:
In recession
Oregon, California, Nevada, Arizona, Idaho, Wisconsin, Iowa, Illinois, Missouri, Arkansas,Tennessee, Mississippi, Alabama, Georgia, Florida, South Carolina, North Carolina, Kentucky, Indiana, Michigan, Ohio, West Virginia, Pennsylvania, New Jersey, Maine, Delaware.
Near recession
Louisiana, Oklahoma, Kansas, Nebraska, South Dakota, North Dakota, Washington, Utah, Wyoming, Virginia, New York, Vermont, Maryland, Connecticut.
What's to blame? A weak job market and industrial production are being
blamed as well as retail sales. Will other states follow? Many experts
feel several others can, but the next couple of months will decide whether the
states teetering on the edge fall and if others follow.
Late selling couldn't put a damper on the best week financial markets had seen since 2003. Varying widely through the week, the stock market was a virtual roller coaster ride of positives and negatives. Up nearly 5 percent last week, the Dow managed to cut into the hefty deficit it had seen the week before, but the big gain seen last week begs the obvious question: is the worst of the crisis over?
Despite the market's biggest one day gain ever, a whopping 936 points, many speculate that the worst is yet to come. Down nearly 38 percent from around this time in October 2007, many speculate the market could lose another 30 percent before it finds its way back on track. So far, the Dow has seen a low of 7,882.51 and while some feel this number was the bottom, others believe it will prove to be just a sampling of how low the market will go in coming weeks and months.
Is there a silver lining? As Warren Buffet, mega-billionaire said last week, "A simple rule dictates my buying: Be fearful when others are greedy and greedy when others are fearful." Buffet believes this is the perfect time to buy stocks, and he might not be alone. The shear number of trades this past week left many believing millions are waiting for the opportune time to strike by buying stock in companies they feel have the best chance to rebound.
Maybe we should just sit tight a bit longer to see what happens in the coming days. This next week will definitely be a good indication on where the market is headed and whether potential investors will continue to wait it out.
September 30 brought about the close of the 2008 fiscal year and no surprise, the largest federal deficit ever. The housing collapse
and economic slowdown are mostly to blame for the deficit, which doubled from 2007.
It's not going to get any better.
Next year will most likely bring an even higher deficit. Many
experts believe that number could top $700 billion. The government
bailout of the financial system and general economic hard times that all
Americans will see most likely will push the record even higher next year.
On top of that likely $700 billion increase in the federal deficit next year,
you can add the nearly $250 billion in government bailout money. With
nearly $1 trillion in projected deficit for next year, can anything be done to
keep 2009 from becoming another record year?
With its currency losing almost half its value due to debts incurred during the lending boom, Iceland is on the verge of becoming the first "national bankruptcy." A collapse of Iceland's financial system would be devastating to western European countries that are heavily invested in the Icelandic banking system. Trading was suspended last week in hopes of curtailing the huge sell-offs during trading.
Iceland's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion. Once noted as the most developed country in Europe, Iceland is now the most exposed to the financial collapse felt around the world. Bank debts equaling several factors larger than its economy, Iceland is struggling to privatize its largest banking institutions in hopes of keeping the country with the highest average yearly income from becoming virtually the poorest.
Giving up good gains, the Dow Jones fell sharply again for the sixth consecutive day, and it is looking like a trend likely to continue without further government action. That action, came today in the form of a lowering of interest rates in the hope of freeing up credit. Wall Street was celebrating the fifth anniversary of a bull market last year around this time. It had accumulated nearly $10 trillion profit to shareholders since 2002. Now, most of that $10 trillion is gone and there is no clear indication in sight as to when the markets will stabilize.
Many experts feel the worst isn't over yet and little will change the downturn until next year. Clearly, the $700 billion federal bailout has done little to quell fears or the free fall. Talks of the government stepping in with further monetary assistance are continuing to grow. The next few days should be critical in answering how soon or if the market will slow its downward spiral anytime soon. So, what's really needed? Is it more money from the government? Patience? Another key interest rate cut? Or something more?
With "recession" now openly talked about and no longer a whispered
word, many believe rough economic times are ahead for everyone in America.
How can you prepare for what appears to be certain tough times ahead?
Most people can take a common sense approach and prepare. Here are a few
things you can do now:
1. Shop smarter — Ask yourself before every purchase "Do I really need
this?"
2. Get out of debt — With interest rates surely to fluctuate, there really
hasn't been a better time to eliminate debt.
3. Save, save, save — Now is not the time to invest in volatile securities or
stocks.
4. Got a house? A car? A good job? Keep them! — This may not be the opportune
time to start car shopping or looking for a new job.
5. If you feel you must make investments, do your research! — Be careful and
cautious if you are plan to invest or continue to manage your current stock
portfolio
This is the time to be frugal with your money. Got more ways to save for
the immediate future? Leave a comment, and let us know.
Thursday, the Senate passed a multi-billion dollar financial bailout.
Just how much was it and where does the money go?
Loaded with tax breaks, the Senate bill passed by a 3 to 1 margin on Thursday with
$700 billion in financial relief. The bill is expected to be pushed through by
Friday. Thirty-nine Democrats and 34 Republicans and one Independent gave
enough support for the measure to pass by the wide margin. Following the
surprising rejection of an earlier version of the bailout proposal, this bill
is ear marked for such things as the buyout of bad mortgage-related securities.
Many opponents of the proposal say the bill will only bail out Wall Street and
do little or nothing for the average American taxpayer. Others feel the
effects of financial turmoil have trickled down to working Americans in the
form of unaffordable credit and job losses.
The bailout bill that passed is the size of a novel — with hundreds of pages of
tax incentives, breaks, cuts and extensions — and will undoubtedly go a long way to
staving off a more severe economic downturn. What does the bill mean,
however, to the average American? Will any of us really see any difference?
