What Comes Down Must Go Up

The market is officially insane, with the DOW at 950+ on the day. At least it is in a good direction, but this is still madness.

I am not sure what has changed to make it go up like this- aren’t all the same problems we had last Friday still here today? Yes, governments all over the world are going to rescue the banks, but I fail to understand how a rescue is cause for celebration. Have we not just kicked the can back down the road a few weeks?

Regardless, I will take a rally over a crash any day, but I would prefer some long-term stability.






74 replies
  1. 1
    Xenos says:

    Wait until all the earnings reports come out over the next few weeks. There may be a lot more capitulation to come.

  2. 2
    Justin Morton says:

    Somehow I doubt this ride is over.

  3. 3
    Redleg says:

    The market went up because Paul Krugman won the "Nobel Prize" for Economics. Eat that, Larry Kudlow!

  4. 4
    Jesse Ewiak says:

    Yeah. The market just rose on news the US government is going to begin nationalizing banks. I guess we are all socialists now.

  5. 5
    Poopyman says:

    Good luck finding that stability. I’m no economist, but my take on today’s rise has something to do with investors wishing real hard. I think magic ponies were involved too, somehow.

    Oh, and the market still owes me 2000 points. Just sayin’.

  6. 6
    Dennis - SGMM says:

    I think that this is the result of optimists jumping back in becauase they don’t want to be left out when the market turns. I think they’ll be disappointed.

  7. 7
    GM says:

    Well, Senator Obama did lay out his economic proposals in greater detail today. The market went up 900 points. I’m not saying it is cause and effect, but who’s going to prove otherwise?

  8. 8
    Eric U. says:

    really, this is just stupid. There is plenty of fallout yet to come.

    The only reasoning I can see behind this is that the money is worthless anyway. I guess every U.S. company is a takeover candidate when the dollar is this cheap. To a lot of world citizens, the stocks of U.S. companies have declined by over half.

  9. 9
    bootlegger says:

    Market prices are based on buyers and sellers. There are more buyers today than Friday.
    Right now your market losses are on paper, they only become real losses when you sell. Don’t sell, it will come back up over the next couple of years. Don’t forget that the record high was set just one year ago.

  10. 10
    wingnuts to iraq says:

    why don’t they close the market on days where it goes UP more than 10%? They would if it went down.

    And that is what is wrong with everything.

  11. 11
    SpotWeld says:

    Please keep you hands and arms inside the car intil the stock market has come to a full and complete stop.

  12. 12
  13. 13
    p.a. says:

    Up certainly is better than down, but it’s obvious the ‘Masters of the Universe’ are insane at present. The sandcastle they have been erecting since the Reagan admin. is washing away, and they are scared of what might take its place. Personally I don’t think they have much to worry about; the worst that may happen to them is a reversion to Clintonism (you can hump the golden goose as much as you like fellas, just don’t hump it to death so the little people get some too).

    Don’t see any big progressive swing to the left. I don’t think it is in Obama’s or the Congressional Dem’s nature. They too are too invested in our corporate masters.

  14. 14
    The Other Steve says:

    WOO HOO!

    I sold at 12,000… started buying back in when it went below 10,000… not all at once. Each day it went down I’d buy a little bit more. But on friday I figured it’d hit bottom and I dumped most of the rest of my cash back in.

    I’ve decided that I need to develop a better investment strategy.

  15. 15
    gopher2b says:

    Paulson is detailing his plan now too which helps (not eliminating equity, getting credit flowing). Some of this has to do with shorts getting burned (badly) in the opening hours.

    I’m going to go out and say: 200-300 point drop tomorrow with the thing settling in around 9000-9500 through December.

  16. 16
    gbear says:

    Wait until all the earnings reports come out over the next few weeks. There may be a lot more capitulation to come.

    As in capitulating yourself off the roof of your financal office building?

  17. 17
    Bitty says:

    Economics (or at least the stock market) is 45% logic and evidence and 55% emotion.

    That’s how I’ve been defining it for years. I’ve seen nothing yet to convince me otherwise.

  18. 18
    Cris v.3.1 says:

    I hope some of you guys who said you were going to buy Apple stocks when it was below 100 a few days ago, are watching.

  19. 19
    gbear says:

    Well, Senator Obama did lay out his economic proposals in greater detail today. The market went up 900 points. I’m not saying it is cause and effect, but who’s going to prove otherwise?

    It would be irresponsible not to speculate.

    I, of course, blame Obama.

  20. 20
    Tim F. says:

    My post hoc ergo propter hoc device tells me that Paul Krugman’s Nobel prize and the market rally cannot possibly be a coincidence. It is also possible that the markets are responding to me finding a penny.

  21. 21

    You found a penny? That would actualy cause a percentage point increase in my 401k. I can haz your penny?

  22. 22
    Nylund says:

    Umm…its going up because almost all of the major central banks in the world decided yesterday that they’ll pump about a gazillion dollars into the system to keep it afloat. Unlimited liquidity and massive recapitalization. Basically, the gov’ts of the world have said, "we will do whatever we can to fix and liquidity and solvency problems."

    Will it be enough? hard to tell, but the market is unsurprisingly very happy with the news.

  23. 23
    Eric U. says:

    Tim F.
    that was my penny

  24. 24
    That One - Cain says:

    I’m kicking myself for not buying Apple at 90 dollars a share. It’s at 110 now. :(

    cain

  25. 25
    Dennis - SGMM says:

    I’d love to think that this is a vote of confidence for the EU and the US adopting the British model of recapitalizing banks in return for an equity stake in same. On the other hand, it could be that half-ton of blow that just arrived on Wall Street.

  26. 26
    Barbara says:

    Because it was oversold. I spoke with my guy this morning and, basically, a lot of things are happening — like hedge funds selling to meet margin calls, people panicking as a result of the way the market is moving rather than because of any fundamental change in companies.

    So if a company has robust earnings, and you’ve been waiting to buy it, today was the day to buy. I expect some blowback tomorrow, as some people figure that they might as well get out on an up note.

    Yeah, it’s crazy.

  27. 27
    chopper says:

    well, this weekend it became clear that the european response to the credit crisis is much smarter than the american one. so paulson and the bush administration basically agreed that buying equity is a good idea.

    part of this is the market finally getting a bit of confidence because of that.

    truth be told, noone can really tell you whether or not 8000 was the bottom of the DOW. i’d speculate that it was if in fact the credit crisis was over. but it isn’t.

    after the crash in 29 there was a major rally afterwords, coming back to wipe away about 60% of the loss in the DOW from the big drop. but because the damage had been done to the banks and the credit market, it started slowly sinking down until it hit bottom a few years later.

    not that i’m saying that’s what’s going to happen, but still you have to remember there are bigger problems that still haven’t been resolved here.

  28. 28
    rts says:

    The significant announcement came yesterday from Europe. The various governments in the European Union announced that they will guarantee inter-bank loans which should cause an easing of the fear of lending between banks. With this credit guaranty the banks will have less reason to not loan money to other institutions and thus the credit crunch should be reduced. In theory, by agreeing to guarantee the loans these governments may not even have to pay much of anything assuming that this action unfreezes the market place. Had the bond market been open today there would have been a significant move in the TED spreads as the difference between Libor and U.S. Treasuries would have narrowed. It’s a start, perhaps, of proper government intervention and it’s telling that it’s being lead by Britain and Europe and not by Bush/Paulson.

  29. 29
    Quaker in a Basement says:

    Obama is up in the polls and that’s why the stock market is falling…falling…fall…uh-oh!

  30. 30

    @SpotWeld: Win.

    This is going to be one of those rides where we get stuck upside down on the Loop of Death for an hour or until all the change has fallen out of our pockets, whichever comes first.

  31. 31
    Comrade MS-4 says:

    Despite the "rally" I’m still down 25% over 4 years.

  32. 32
    stickler says:

    I’m thinking "dead cat" too.

    Although if you’re an adventureous trader, you could buy a few thousand shares of GM and see what happens. The stock has never been cheaper!

  33. 33
    Mark S. says:

    I think that this is the result of optimists jumping back in because they don’t want to be left out when the market turns. I think they’ll be disappointed.

    That’s my best guess as well. I think it’s going to be a really bumpy ride, and who knows where it will end.

  34. 34
    gbear says:

    Bwahahah. Palin gets snotty with her own supporters. You unpatriotic latecomers, you.

  35. 35
    Jack Roy says:

    Two things:

    1) The market frequently overreacts for a day and then immediately corrects in the opposite direction at the next open bell. So this could be more or less random.

    2) The market’s been tanking on all news lately, and it’s kind of because none of the plans emerging from Washington have done a lot to inspire confidence. That kind of changed Friday when Treasury announced it was going to invest directly in troubled banks, according to the "stock injection" component of the bailout bill that Paulson notably did not include in his original proposal. While not exactly nationalizing the banks, it does make a lot more sense than the troubled-asset-repurchase schemes—the latter of which I don’t think really Wall Street was able to get a good feeling for how they’d actually solve the problem. So it’s also possible that the feds have finally started aiming at the real problem and Wall Street is reacting to it positively.

    By the way: If you use iTunes, subscribe to NPR’s "Planet Money" podcast—it’s the offshoot of the This American Life stories about the present crisis. It won’t explain everything about the credit crisis, but if you don’t understand anything about it, it’ll give you a pretty good (and almost daily) basic knowledge.

  36. 36
    ninerdave says:

    Ignore the DJIA. It tells you nothing more than what traders are feeling at a given moment. Has nothing to do with the actual economy, and I’d actually argue that the S&P 500 (which had an outstanding day too) is a better number to watch if you need to watch any numbers.

    I’m wagering that the market is going to be see sawing in this extreme fashion until the election is over and Congress gets back to work.

  37. 37

    The real issue is insolvency, not liquidity. Banks wouldn’t lend to banks because they feared the other guy was as busted as they are. By guaranteeing the interbank loans, they’ve resolved that fear.

    Of course, this is temporary. There are larger and more fearsome challenges ahead.

  38. 38
    Zifnab says:

    I’m calling shinanigans. The market is a total spoof. This’ll crater by mid-day tomorrow, if for no other reason than people buying at 9am this morning just made a 10% profit less than 8 hours and people will be eager to claim the money while its on the table.

    Once the bigger rollers start selling, the bottom will fall out and the market will settle back down to something normal – like 8.5k. Then the earnings reports will come out and start another stampede away from Wall Street.

  39. 39
    Barbara says:

    The thing to remember is that, as nutty as it may be, if someone sells, someone else is buying. Otherwise the price is zed.

    Last week, everyone was selling everything and going into treasuries.

  40. 40
    oh really says:

    Economics (or at least the stock market) is 45% logic and evidence and 55% emotion.

    That’s how I’ve been defining it for years. I’ve seen nothing yet to convince me otherwise.

    45/55?

    It’s more like -45/+155. Overreaction has become the norm, and it’s getting worse.

    I really enjoy commentators who object to gambling but encourage participation in the stock market. You may have a better chance of coming out ahead in the stock market, but it is definitely not more rational than gambling, where the odds are knowable and don’t depend on things like George W. Bush, Johnny Drama, Pit Bullshit Palin, etc. and the whacked out decisions and actions they make and take.

  41. 41
    Comrade Stuck says:

    Yes Comrades, the capitalist profiteers have all gone insane and we the people own them now. We control the drug they need and will dispense it at our pleasure , or until we run out and our Glorious Mother China loans us some more. The workers Utopia is in sight, my Comrades, it is the light at the end of the tunnel, the beacon on the horizon. It is the train that will flatten the last greedy vestiges of the so-called free market, and afford all their very own Peoples Apartment — with only two other families to share it with.

  42. 42
    bootlegger says:

    dead cat bounce

    I love that phrase!! May be the name of my next cat, Bounce.

  43. 43

    The stock market has developed a rather nasty case of Galloping McCain Necrosis. You just have no idea what the victim of this insidious disease will do from day to day, or even be from moment to moment.

    The best possible treatment is to wrestle the victim to the ground and have a large nurse sit on him.

  44. 44
    chopper says:

    The real issue is insolvency, not liquidity.

    actually it’s both. buying up all the toxic paper helps the insolvency issue, guaranteeing interbank loans helps the liquidity issue. thing is i think it’s just too damn expensive to do both effectively.

  45. 45
    neil says:

    Columbus Day….or as Native Americans could rightfully put it, "There Goes the Neighborhood Day".

  46. 46
    Comrade Nixon Hailfire Palin says:

    @gbear:

    Bwahahah. Palin gets snotty with her own supporters. You unpatriotic latecomers, you.

    When all you’ve got is a hammer …

  47. 47
    ricky says:

    If I were Rick Davis I wouldn’t give up my day consulting contract with Freddie Mac just yet.

  48. 48
    Cris v.3.1 says:

    @gbear:
    From the linked story, in which Gov. Palin mistakenly assumes loud voices in the crowd are from protesters:

    "I hope those protesters have the courage and honor to give veterans thanks for their right to protest," she said.

    Yknow, that’s a clever line and all, and not a bad attempt to turn the conversation around. But at the risk of stirring up a bee’s nest: there are lots of things I will thank a veteran for, but protecting my right to protest isn’t one of them.

    Time after time, we have seen authorities use war to diminish, not strengthen, our right to protest. That’s not the fault of veterans, many of whom may have enlisted believing they were protecting freedom. But your personal objectives when enlisting don’t necessarily reflect the objectives of the people deploying you.

  49. 49
    Eric U. says:

    when I have made money on the stock market, it has because I could capitalize on people’s greed and stupidity. The nice thing is that stupid people are more or less predictable in an up market. Too bad we really haven’t had one of those recently (that I wasn’t afraid of). The bad thing is that stupid people are not predictable in a down market. I think an Obama presidency will probably be good for my portfolio.

    in response to Cris v.3.1:
    as a veteran, I agree. The military is not a good protector of liberties. Good thing we haven’t needed them to do that for 200 years or so.

  50. 50
    Gus says:

    Oh, and the market still owes me 2000 points.

    That’s how trainable people are. When the DJIA gets back to 11,000 everyone will hail the healthy economy forgetting the huge fall. It’s like gas prices. Now that gas is under $3, people forget that it was around $2 a year and a half ago.

  51. 51

    Let’s put it this way: even with today’s gains, the stock market is still down 25% in the past quarter. Further, today’s gains don’t get people who lost a lot on retirement accounts back to where they were a year ago. Far from it.

    Worse, the stock market is volatile. A market this volatile is not healthy. Wide swings up and down don’t make any sense. And if it goes up 932 points in a day, it can easily go down twice that. We’ve had a series of minicrashes. I think a big one is just around the corner.

  52. 52
    Comrade Nixon Hailfire Palin says:

    Shorter Palin: Our brave troops are defending your right to protest, so shut up.

  53. 53

    "I hope those protesters have the courage and honor to give veterans thanks for their right to protest," she said.

    Huh?

    To quote Terry Pratchett, Sarah Palin is a misery wrapped in an enema.

  54. 54

    Additionally, flooding the market with cash may bailout the banks. But it’ll just cause further inflation. What people don’t get–largely because of the bunk CPI–is that this crisis was caused by inflation. If we have $5 gas next year, but wages don’t rise to account for that, we’ll continue to have problems. A full-blown nationalization of the banking sector is probably called for. Want to know how we should pay for it? Tax the shit out of the oil companies.

  55. 55
    Crusty Dem says:

    I’m waiting to hear someone knowledgeable say this, but I know there was a lot of short selling last week (they opened short sales back up last Monday, remember what did the market did then?), and once things started heading up, people were trying to dump their short position, sending the market shooting upward. The rest of the market misinterpreted this as optimism and started buying in.

    Won’t last.

    Guess you could say I’m one of those glass half-empty guys…

  56. 56
    liberal says:

    @The Bag of Health and Politics:

    A full-blown nationalization of the banking sector is probably called for. Want to know how we should pay for it? Tax the shit out of the oil companies.

    I think oil companies should be heavily taxed (well, not generically, but I think royalties should be much higher than I’m guessing they are).

    But it’s not clear in this particular instance why the sins of Wall St should be borne by the oil companies.

    The sins of Wall St should be borne by Wall St. Which means there should be a transaction tax.

  57. 57
    Perry Como says:

    but this is still madness

    THIS IS SPARTA!!!

  58. 58
    JL says:

    @The Bag of Health and Politics: Also the jobs number is unhealthy. Alot of people are having to work part time jobs because they cannot find full time work. Europe’s infusion of cash in their banks might have helped with the credit crisis but the "fundamentals of the economy" are weak. (Don’t tell McSame) Can’t wait until after the holidays to do some serious retail shopping.

  59. 59
    w vincentz says:

    Doncha just love watching monkeys riding on yo-yos?
    Coked up monkeys, yo.
    Dead cats, the other yo.
    Free yo-yos to all. A yo-yo in every pot.

  60. 60

    "I hope those protesters have the courage and honor to give veterans thanks for their right to protest," she said.

    Way to change the subject, moosehunter.

  61. 61
  62. 62
    Tsulagi says:

    The market is officially insane

    Not so according to some deep thinkin going on over in the land where intelligence goes to die, or at least be waterboarded…RedState.

    It’s all part of a carefully manufactured plan. No coincidence the mess in the financial sector coming right after the conventions for those sages. It’s all part of a VLWC operation to get their Manchurian Candidate in office. It’s as clear as the Soros strings holding up Obama.

    No need to argue. Since they’ve already been pre-fooled, as Bush once said they can’t be fooled again.

  63. 63
    oh really says:

    Last week, everyone was selling everything and going into treasuries.

    If "everyone" was selling "everything," wouldn’t that leave no one to buy anything?

  64. 64
    Comrade Stuck says:

    Tax the shit out of the oil companies.

    Nationalize the fuckers. In for a socialist penny, in for a socialist pound!

  65. 65
    dslak says:

    If "everyone" was selling "everything," wouldn’t that leave no one to buy anything?

    To say that people were "selling" means that they were trying to get rid of stocks that they thought would go down in value. It doesn’t mean that no one is buying, but it does mean that there is declining demand.

    Since the value of stocks is determined primarily by demand, that’s a good reason for anyone heavily invested in such stocks to find people willing to pay for them, even at a fraction of the initial cost.

  66. 66
    JT from Texas says:

    @liberal:

    Quite a few people have no earthly idea just how time consuming, expensive, and labor-intensive it is to bring oil and natural gas out of the ground. Now I’ll grant you, there are some very wealthy CEOs, CFOs, COOs, etc. etc. walking around from the big seven oil companies, but there are also many smaller, independent oil producers, of which I am an employee. We are not raking in money hand over fist. Quite the opposite, we are lucky to have work. You have to remember, that when the price of oil and gas drops, we get laid off just like everyone else, because the profit margin for domestic production is so slim, and the fact that there are so many in-flexible costs associated with locating, leasing, drilling, etc. etc. that it just isn’t worth it. When the price of gas goes up, I don’t see an extra dime, because that cost is determined strictly by how much refined fuel ENERGY TRADERS seem to think there is available at any given time. Foreign producers could decide to sell us more fuel and I’d be on the street tomorrow. How’s that for job security?
    The big money right now is being made off-shore in the free-for-all that is likely completely screwing up our already fragile coastlines.

    All I’m saying is before you rush to say ‘off with their heads’ about the oil companies, try to remember that not all oil companies operate the same way, and there are hundreds of thousands, if not millions of Americans employed directly and indirectly by the industry.

    **Steps off Soapbox**

  67. 67
    Jeff says:

    Wacky post-hoc justifications aside – the market went up because we’re in a bear market. Bull markets are characterized by steady upward progress, bear markets are characterized by wild swings.

  68. 68
    gopher2b says:

    I’m waiting to hear someone knowledgeable say this, but I know there was a lot of short selling last week (they opened short sales back up last Monday, remember what did the market did then?), and once things started heading up, people were trying to dump their short position, sending the market shooting upward. The rest of the market misinterpreted this as optimism and started buying in.

    I said this but it would be the biggest short squeeze EVA.

    I think they are getting the credit crunch crisis fixed in the short term and people are also reacting to that short term benefit. The problem is everytime the economy contracts, there will be another lesser credit crunch–whether those are the aftershocks or this is just a prequel is another story. I think its the former. However, (as someone eluded to above) everyone is so focused on the credit crisis very few people are focused on the shitty ass financials that are going to come in over the next 6 months. Great long term buys but if you need the money for retirement, new house purchase, or food-stay out of it.

    AND, if I see one more person compare this to the Great Depression I think my head will explode. The economy in general and the monetary system specifically are so much different from the olden days. There will be cities (like Detroit) that look like 1931 but others will look like 1997.

  69. 69
    Greg says:

    Capitalizing the banks is one factor.

    Another factor is P/E ratios are incredibly low right now, which makes buying stock fairly attractive. Many companies have been shedding debt and shoring up their balance sheets the last year or so in anticipation of a recession, so most companies are still in pretty good shape, despite the turmoil within financial companies.

    Just have to wait and see what happens over the next week.

  70. 70
    Bill Arnold says:

    Not so according to some deep thinkin going on over in the land where intelligence goes to die, or at least be waterboarded…RedState.
    The comment thread there is just … loopy.
    I used to read alt.conspiracy in the age of newsgroups, for the humor value. This is even better.
    It is at least as possible that our right-wing-ruling-class overlords were desperately trying to put off the meltdown until November 5, and failed spectacularly due to random noise in the system sparking the meltdown.

    The conspiracy planning matrix looks something like this (to me) (matrix flattened to text):
    (1) meltdown before election means Obama wins. Some nationalization of banks, but no money for Obama’s timidly-socialist-leaning spending plans. Single-party government. Overall, a wash for the overlords.
    (2) meldown after election means a possible McCain win. Tax cuts. More money in the defense-industry trough. Nationalization of Wall Street’s bad gambling debts. Divided government with Republican at the helm. Palin + McCain’s melanoma a possible problem. Overall, a win for the overlords.
    (3) no meltdown. Unlikely. (No way they actually believed their value at risk models.)
    Your analysis may vary. :-)

  71. 71
    Once-ler says:

    Someone in government finally did something that makes sense. Too bad it wasn’t our government.
    Read Krugman.

  72. 72
    Xenos says:

    @JT from Texas:

    All I’m saying is before you rush to say ‘off with their heads’ about the oil companies, try to remember that not all oil companies operate the same way, and there are hundreds of thousands, if not millions of Americans employed directly and indirectly by the industry.

    The point of nationalizing the oil industry is not to put people like you out of work. It is to stop thieving insiders from ripping you, me, and everybody else off. It is not going to happen in any case, even if they do deserve it.

  73. 73
    TenguPhule says:

    Although if you’re an adventureous trader, you could buy a few thousand shares of GM and see what happens. The stock has never been cheaper!

    Until tomorrow.

    GM is a undead dinosaur that totters on a borrowed lifeline of a few billion and bleeding shitloads of cash from every major artery.

    If they don’t get a major infusion of liquid green, they will collapse into welcome dust in early 2010 when they run out of cash.

  74. 74
    blogreeder says:

    Nationalize the fuckers. In for a socialist penny, in for a socialist pound!

    I knew this place was communist. There can never be just a "little" left. Obama should fit right in.

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