Investors shuddered in horror as the market was dropping; with the Dow down 800 points in midday trading and finally closing at a better but still dismal 9,955.50, off -369.88or -3.58%.
So, on this terrible day what if anything made a good showing of itself? Four stocks among the ones that I follow popped up.
Apple Inc (NASDAQ: AAPL) closed at $98.14, up 1.07, or1.10%. Apple needs no introduction to most readers of BloggingStocks or anyone breathing almost anywhere on the planet. Although the stock appears to be a fallen star for the time being and is down 51% for the year it managed to outshine almost everything else today. Apple has not traded at a P/E below it's projected growth rate in years so the bargain hunters were obviously interested.
East West Bancorp (NASDAQ: EWBC) closed at $15.69, up0.61, or4.05%. Some banking stocks are recovering nicely and this small California bank with business in the Asian community here and in China as well seems to be getting out from under the taint of the sector. It is one of the stocks I included in Chasing Value: Financial devastation? Still up but less. If I had to 'bank' on whether this stock is higher or lower in a years time I would say higher.
IRobot Corp (NYSE: IRBT) closed at $13.50 up 0.36 or 2.74%. the maker of small robotic home vacuum cleaners and military reconnaissance vehicles has been hovering between in a tight range for months. On this day when other companies were suffering it managed to eek out a gain.
Metropolitan Life (NYSE: MET) closed at $44.32, up2.19, or 5.20%. which is nothing short of remarkable today. Now that AIG has tanked, I think it is the largest of the international life insurance companie and is no doubt chasing and getting some of American International Group's (NYSE: AIG) business. AIG was up a penny today too. Investors Seek Safety with MetLife.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.DISCLOSURE: I currently own shares of IRBT.
On October 24 2003, the Dow closed at 9,582.46. It was the last time the Dow Jones Industrial Average closed below 9,600. Today, it revisited that territory when it plunged 753 points to 9,572.08, and came within striking distance of its biggest one-day point decline from last week -- 778.
While last week blue chips suffered from fears Congress wouldn't pass the bailout package, this week stocks plunge despite the approved -- and enlarged -- rescue plan. As the global financial crisis deepens, its effects cascade to more areas and over more industries.
Fears of a global economic slowdown further aggravated mood on the Street and markets are seeing stocks in a free-fall. It seems that realization has hit for how long it would take for the bailout to allow some relief, how long it would take for the housing market to recover, while all along economic fundamentals such as the job market are deteriorating.
All 30 of the Dow's components were in the red, with Alcoa (NYSE: AA) taking the dubious title of the Dow stock that's declining most -- down over 12%. Following closely are Citigroup (NYSE: C), American Express (NYSE: AXP) and Boeing (NYSE: BA) -- each down more than 10%.
The Nasdaq composite is meanwhile down nearly 160 points, or over 8%, to 1,787. The S&P 500 down nearly 7.5%, or over 81 points to 1,016.
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.
On the day the stock market was headed into the abyss, my wife and I were busy shopping for cars. I felt like Nero fiddling as Rome burned.
This was not a frivolous purchase. My wife, who like her father is nuts about cars, researched every make and model in our price range for a year. No, make that two. Impulsive, she is not. While we were waiting in our local Ford (NYSE: F) dealership, I checked the stock market on my iPhone (another recent purchase) and was stunned by the dramatic decline in the Dow Jones Industrial Average. My wife gasped when I told her about the Dow's record decline. We briefly wondered whether now was the right time to get a car. Ultimately, we decided to buy the Ford Edge thanks to the zero-percent financing available.
My wife and I are fortunate that we both work and have good credit scores. We live in a modest suburban house and pay off our bills regularly. My wife is a CPA and is fanatical about keeping our debt to a minimum. Until recently, we received at least a dozen offers a week for credit cards and home equity loans. I am glad that my wife insisted we toss them all in the trash. Otherwise, we would have held onto our old car for a while longer since the Big Three are tightening their credit standards.
TheStreet.com's Jim Cramer says without the Paulson plan, every component is in trouble. Let's take a look.
Without the Paulson plan, or if the plan is so watered down and delayed, I have been saying all bets are off and we could be in for a huge swoon. How huge?
I like to sit down and noodle on the actual components of the Dow Jones Industrial Average to give you a real sense of what can go wrong. And there is so much going wrong. The credit markets are vanishing, the earnings are vanishing and the only hope is a plan that ignites credit markets, forces money off the sidelines and gets this economy and the worldwide economy moving again.
Not long ago, I postulated that this market is literally repealing all of the moves since the Brazil-Russia-India-China emergence that gave us better markets to sell into than just the U.S. With the collapse of Chinese growth -- they have simply ceased to be importers since the summer -- the inflation in India, the war in Russia and a U.S.-led slowdown in Brazil (although that remains a robust market) BRIC is more like having a brick around your neck than a wind at your back.
Meanwhile, the peak in energy and the collapse of the financial system have left both of those groups in disarray with valuations simply too difficult to pin down, so you retreat to worst-case scenarios where you can at least find some terra firma -- mainly where stocks were last time things were this bad.
Today was easy to focus on. And it was highly unpleasant. It was all about financial stocks and the meltdowns and the merger and the bailouts. The huge drop in oil after Hurricane Ike didn't kill off the oil infrastructure didn't amount to anything at all. The beatings will continue, regardless of morale. The VIX hit 30 and that only helped for a brief bit.
Here are today's unofficial closing bell levels: Dow 10,954.07 (-504.48; -4.42%) Nasdaq 2,186.66 (-81.36; -3.60%) S&P500 1,198.32 (-59.01; -4.71%) 10YR T-Note 3.483% (-0.247%) 52-Week Lows
Lehman Brothers (NYSE: LEH) led the carnage today. Richard Fuld held out for solid merger terms too hard and it now looks like he made the entire firm pay the ultimate price. It is filing for Chapter 11 and for all practical purposes is going bye-bye. Shares were down 94% at $0.20 right before the close.
American International Group (NYSE: AIG) is also on the ropes. Its shares were down 60% at $$4.78 immediately before the close. The leading insurance company in the world, or the former one anyway, is on the verge of collapse.
"Bulls make money; bears make money; in the end, pigs shoot themselves through greed," says Charles Payne in WStreet Commentaries. Here's his cautiously optimistic outlook.
"Let's get this straight; the Fed is willing to take damn near any form of collateral including those prints of Van Gogh's 'Sunflowers'" in the employee dining room, right? So, how much more do financial companies want...or need? They'd love a blank check but that isn't going to happen.
"The total amount available under the Term Securities Lending Facility (TSLF) could increase from $200 billion and there could be an interest rate cut. But, for the most part Wall Street has to fend for itself.
"In the 1969 film They Shoot Horses, Don't They? we witness a Depression-era dance marathon for a grand prize of $1,500 (that's not much money now).
"The emcee of the events eggs on the contestants, already desperate to win at any cost. Throughout the film the main character is reminded of a time during his childhood when a horse was put down after breaking its leg.
"Many would say that Wall Street was egged on by an overly accommodative Federal Reserve or an administration reluctant to regulate the industry.
"As a result, the financials have been in a marathon dance for survival this year, but just like that horse at some point putting down for the count those with the largest fractures may be most humane.
As of midday Monday, the Dow had rebounded off early-session lows, but if investors / readers are thinking about entering this market now, caution is advised, for several reasons.
First, those familiar with technical analysis know that the Dow's rebound to a loss of 180 points to a level of about 11,233, up from a loss of more than 300 points, could be just short-covering.
Second, major unknowns exist regarding the financial system. And I mean major.
The fate of American Interational Group (NYSE: AIG) remains an enormous question mark. The largest insurer of assets, AIG may face a downgrade that would trigger a collateral call from debt investors who bought credit default swaps, a form of insurance for bonds. Further, if hedge and other institutional investors sense those swaps are not in force, they may seek swaps elsewhere and/or sell assets to reduce market risk / raise capital. That could spark a new round of stock selling. AIG's shares fell $5.33 to $6.81 in late Monday morning trading.
Wall Street is swimming in red this morning, bracing for a huge stock selloff Monday following the weekend's happenings: Lehman files for bankruptcy, Merrill is sold and AIG is scrambling to raise cash. Global markets were down sharply in the wake of the news out of the U.S. Meanwhile, in the background of all this, oil prices fell below $97 a barrel on Monday as Hurricane Ike inflicted minimal damage to oil installations.Some economic data will be out today, but will likely take second stage to all the goings on. Around 7:20 Dow futures were down 365 points, S&P 500 and Nasdaq futures down nearly 50 points.
Lehman Brothers (NYSE: LEH) filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan, a victim of the crisis it helped create. That's after Bank of America and Barclays (NYSE: BCS) decided not to purchase it without the aid of the Treasury. Shares of Lehman opened down 84% in Europe and are over 87% down in pre-market trading to $3.20.
Meanwhile, Merrill Lynch (NYSE: MER) sold itself to Bank of America (NYSE: BAC) in an all-stock transaction worth about $50 billion. The purchase price values the company at more than $29 a share, at least a 70% premium from Merrill's closing price on Friday of $17.05. While MER shares are up over 36% in pre-market trading, BAC's are down over 13%.
Then there is American International Group (NYSE: AIG), which said Sunday it is reviewing its operations and discussing possible options with outside parties to improve its business, some interpreted this as asking the Federal Reserve for a $40 billion loan. AIG stock is down over 42% in pre-market trading.
Other related news stories are mostly of attempts to calm the market:
Stocks may have closed up on excitement that the Fannie/Freddie bailout was going to be the end-all be-all as far as the death of the markets, but sellers sold the near 300 point DJIA gap-up throughout the day before a day-end rally brought the index levels back higher. In fact, many financial stocks fell lower. Oil was flat after being up on threats that Hurricane Ike will challenge the Gulf of Mexico and circa-Houston oil and gas infrastructure.
Lehman Brothers Holdings (NYSE: LEH) was the real disappointment. Shares were up over 15% pre-market, yet word that a non favorable sale or even a fire sale was the best hope for the firm sent shares to the showers. Lehman's stock was down almost 15% at $13.83 in today's final minutes.
The Grand Old Party (GOP) is known for supporting big business. So it pays to elect Republicans to the White House, right? If you analyze the stock market performance under Republican and Democratic presidents, the answer is a resounding NO. Democratic presidents generate average stock market returns in excess of the risk-free rate of 10.69% -- roughly six times the 1.69% earned under Republican administrations.
Investopedia describes the research of Pedro Santa-Clara and Rossen Valkanov who analyzed the value-weighted returns on stocks between 1927 and 1998 under Democratic and Republican presidents. And they found that the excess returns of stocks over the risk-free rate of return -- as measured by the Center for Research into Securities Prices (CRSP) indexes versus three-month Treasury bill rates -- were far higher for Democratic presidents (10.69%) than for Republican ones (1.69%).
Of course, these are just long-term statistics. Under the last Democratic president, stocks rose an annual average of 17.4%. The current Republican White House occupant has presided over an average annual decline of 1.1% -- the S&P 500 was 1,342 when he took over and stands at 1,233 today -- the only president of either party of the last 11 to oversee a decline in stocks.
The U.S. market is driving the world -- whose stock indices plunged after yesterday's 345 Dow rout. But what does today bring? A chance for recovery or further devastation depending on whether reported economic statistics are better or worse than economists expect. Early reports are bad.
Here are the reports to watch, and what analysts had been expecting according to CNNMoney:
Job cuts - Economists expected 75,000 lost jobs, but the 8:30am report was 84,000 lost jobs -- worse than expected.
Unemployment rate - They had forecast the jobless rate to stay the same at 5.7%, but economists were wrong on this one too and unemployment rose to 6.1%.
Hours worked - Economists anticipated the hour work week wouldn't change from July at 33.7, and they were right.
Change in hourly earnings - Economists saw a 0.3% increase in the hourly wage, the same as July, but hourly wages rose 0.4%. Some may interpret this as inflationary pressure, but the increase is likely not enough to increase consumer spending either.
In general, these statistics suggest consumers are less able to spend money. Since initial numbers suggest things are worse than had been anticipated, stocks could plunge, causing policymakers to meet this weekend to try to hatch another plan to boost investor confidence for announcement on Sunday night.
Nobody ever knows why the stock market goes up or down every day. But that doesn't stop people from offering reasons. For instance, people used to say that if oil prices fell, stocks would rise. They said that if the government came to the rescue of troubled financial institutions, that would boost stocks. And they suggested that if the Fed cut interest rates more than expected, investors would buy stocks.
But today, The New York Times decided not to even offer an explanation. It suggested that nobody knows. And I agree with the Times -- I just disagree on all the other days when the media does offer an explanation for the daily movement of the stock market. Here are some of the discredited means of explaining today's move.
Oil. Today oil fell $1.70 which normally makes stocks go up.
Jobless claims. The number of people claiming "unemployment benefits last week rose to 444,000, near a five-year high," according to the Times. But those numbers have been rising all year.
The standard for comparison is the Standard & Poor's 500 Index, which closed on June 30, 2008 at 1,280.00. The S&P closed today at 1,236.82, down 3.37%. The percentage gains do not include dividends. Four out of five of my picks beat all the indices; CB was close.
1) Johnson and Johnson (NYSE: JNJ) -- when recommended the stock closed at $64.34 and paid a 2.89% dividend yield. It finished at $70.45 -- up 9.5%
2) Teva Pharmaceuticals ADR (NASDAQ: TEVA) -- when recommended the stock closed at $45.80 and paid a 1% dividend yield. It finished at $47.92 -- up 4.63%.
"While watching the Olympics, I couldn't thinking about the investment opportunities of the various countries participating in the games," says exchange-traded fund expert Carl Delfeld.
Recognizing that this is not a "scientific" approach nor a primary basis for seriously determining one's asset allocation the editor of Around the World with ETFs speculates, "While it is admittedly a stretch, let's consider what an ETF porfolio of the top ten countries in the Beijing Olympics medal count would look like."
"I hope that while watching the Olympic games many investors were also reminded at how the world is changing and why they need a global portfolio to capture value and growth around the world.
"The U.S. did remarkably well across the board underscoring its role as the world's leading investment destination. China surged to win the most gold and reach the symbolic level of 100 medals.
"Quite an achievement that punctuates China's growing heft. With the Shanghai Composite down 55% this year, it has come down to earth and is interesting from a valuation perspective.
"Next comes Russia with a performance fueled by a strong Olympian tradition and petro dollars but perhaps a bit overshadowed by the Georgian fiasco. I will take a pass on this one even though it is off 36% since just May.
Investors shuddered in horror as the market was dropping; with the Dow down 800 points in midday trading and finally closing at a better but still dismal 9,955.50, off -369.88 or -3.58%.
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.
On the day the stock market was headed into the abyss, my wife and I were busy shopping for cars. I felt like Nero fiddling as Rome burned.
Today was easy to focus on. And it was highly unpleasant. It was all about financial stocks and the meltdowns and the merger and the bailouts. The huge drop in oil after Hurricane Ike didn't kill off the oil infrastructure didn't amount to anything at all. The beatings will continue, regardless of morale. The VIX hit 30 and that only helped for a brief bit. 
Stocks may have closed up on excitement that the Fannie/Freddie bailout was going to be the end-all be-all as far as the death of the markets, but sellers sold the near 300 point DJIA gap-up throughout the day before a day-end rally brought the index levels back higher. In fact, many financial stocks fell lower. Oil was flat after being up on threats that Hurricane Ike will challenge the Gulf of Mexico and circa-Houston oil and gas infrastructure.
I was out all morning and returned to my desk to find 
Big Losers: 15 large stocks that have plummeted
What is going on with the markets? What should you do about it?
Closing Bell: The meltdown that almost was . . . NCC, HIG, SAP, DNDN
