Global Stock Markets Panic - Could This Be Capitulation?

posted October 24, 2008 - 8:23am
Global Stock Markets Panic - Could This Be Capitulation?

The USA wakes up to another bloodbath in Asian and European markets. London down nearly 10%, Tokyo also down 10%.

The NYSE halted trading on US index futures. As of writing the DJIA is down 600 and looking to test 8000, the S&P 500 is still not quoted but last trade looked down about 8%.

Gold down, oil down, panic has spread and big money is repatriating US Dollars and hiding them in Treasury bonds, although getting a pittance interest rate.

What can the individual do? I personally think it is too late to do very much. It is very bad to sell on panic days unless you are a trader and can buy back again at what looks like a near bottom.

Perhaps following the big money is not such a bad idea. getting 3% a year on 30-year Treasuries may look grim but the stockmarkets have made zero profit in 10 years.

Update: Dow below 8000 and falling. Below 7500 and there is no safety net. Very likely to see a 1000 point drop today. Also the Fed meets next week and will continue to be volatile especially after their announcement.

Many have commented that there seems little logic to the markets. That's only because we are not privy to private information as to what the central banks and huge institutions think they are doing.

Author: Rycharde Manne
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Comments

Fear & greed

Idlewild - Fri, 2008-24-10 12:08 pm
are much at work in institutional investing too... that's where most of the money in the market is. It was partly greed that led to the proliferation of subprime mortgages, promoted by banks, other lenders, and Fannie Mae. Now the credit market has dried up, due largely to fear on the part of banks and other institutions that the lendees may not be financially sound enough to pay the money back.

Fed rate cut to 1%?

Rycharde Manne - Fri, 2008-24-10 12:01 pm
I do remember the 2002/2003 markets and capitulation then was like 500 points down then 600 points up, all in the same day. We've rather had days like that already and investors are still in panic mode. The other thing I recall was that the bottom was very precise, with very obvious automated trades kicking in. We've even had those happen, when all the talk was of 11,331 as the bear market level - remember 11,331?! So nobody knows. Today I managed to make some nice money on the FTSE drop, and also a bit on the late bounce up. The amount of institutional manipulation is huge. I want to see what happens if the Fed drops rates to 1%. At that point there is little flexibility to lower further, which means bond prices may have maxed out, which means time for non-US investors to possibly sell their Treasuries. At that point I want to see what happens to the dollar. Next Fed meeting is next week, I think, so not so long to wait. I don't deal in stocks, but best to pick companies that don't have any credit risk. Easier said than done as needs someone with the skills to read through company reports and spot things that look odd. Big companies with lots of cash and good cashflow who have been sold off in the general panic would be great - good luck finding them. Money for your Thoughts - join now OWO-BV

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mamamia07 - Fri, 2008-24-10 11:55 am
While fear and greed would affect mostly retail money, this kind of fall is occurring due to big institutional money withdrawals. That is triggered by bad debts/opportunism/cartels/privy to information. I guess retail investors should stay off for the time being, at least till the polls. Get Top Mutual Funds Links and MF resources Here My writings here My profile here My Xomba

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Capitulation and the stock markets

Idlewild - Fri, 2008-24-10 11:29 am
"Many have commented that there seems little logic to the markets. That's only because we are not privy to private information as to what the central banks and huge institutions think they are doing." A big factor is that while there are logic and statistics in the market, there is also emotion (including fear and greed). There's a long-held belief that capitulation marks the end of a bear market. I wonder if we're near that point yet... at some point the prices get so low that bargain hunters step in to snap up some cheap stocks (though I think it would be smart to stick to high quality companies).

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