It's Not 1929

So says Larry Kudlow.  But the Dow appears to be in free fall...

Comments

[AndyJ]

Democrats in Action... Raising taxes and adding restricions do not inspire confidence. What Congress does when it returns from their month long recess is suspect. By not acting they leave the doors wide open for major mischief to be rammed through in the guise of "Gotta Do Something"... The market acts ahead of the news. They know that lots of evil will slip through while Congress "mau-maus' the Iraq war..

When we get to a Dow of 11,000 then we'll be in the "depression" range... In the meantime, look at companies, their fundamentals, their leadership, their markets and invet in good compnies for the long term.

[DRaftervoi]

Ah, I disagree, as usual. The jitters are from the subprime meltdown (take a look at NFI's chart) spilling over to the banks with a lot of exposure to subprime (WM, C) but also to the banks that aren't very exposed (BAC) and hence into the general market as worries about credit becoming less available spread. Plus, a seven or eight percent drop barely even qualifies as a buying opportunity (IMHO, BFD). I'd like to see it drop another 10%.

[Gail]

"This problem is going to linger, and every headline is going to cause even more nervousness in the market," said Peter Cardillo, chief market economist with Avalon Partners. "Hopefully, these fears will begin to wane. If the credit crunch story should begin to expand further past these related names, then we can say these fears aren't overblown."

For the market overall, the fear that an unraveling housing sector is threatening to take down the entire economy has meant incredible volatility for the major indices of late.Link

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"Those clamoring for a Fed rate cut are doing nothing less than begging the Fed to inflate in order to ease the pain in certain sectors of the economy and financial markets," says Michael Darda, chief economist at MKM Partners. "It's not the Fed's job to bail out the mortgage market or to prevent equities from having a correction."

By many accounts it was the so-called Greenspan put, or his quickness to move rates to 1% in the wake of the Nasdaq crash and to keep them there too long, that encouraged the easy lending standards and risk-taking that became commonplace. Link

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"I think there is a tremendous amount of uncertainty with regard to the credit markets and how the situation will ultimately settle," said Mike Malone, trading analyst at Cowen & Co.

Investors remain worried that problems in subprime mortgages -- those made to borrowers with poor credit histories -- will force lenders to make credit less available. When people and companies can't borrow money as easily, the economy tends to slow down.

"There is not going to be one sort of clear signal that suggests everything is OK," Malone said, referring to the subprime and credit worries. "I think it's going to take time and the equity markets are going to experience heightened volatility."

Investors could be in for more tumultuousness in the coming week, which not only includes economic figures on productivity and consumer credit, but also brings a meeting of the Federal Reserve's Open Market Committee, which has left short-term interest rates unchanged for the past year. Investors will likely be looking to its statement following its meeting for any word on the mortgage and credit markets.Link

[AndyJ]

Sub Prime problems have been known and the market has adjusted. Bear Sterns is getting clobbered and may be affecting its abilities in other areas. Having known the Good Folks at Bear Sterns; it couldn't happen to a nicer bunch of folks. The market has adjusted to the sub-prime fall out. Reacting now may be small investors. Smart money moved in the Spring.

Credit issues are not the problem. The solutions that will get jammed thru by a demogoguing Democrat Party in Panic when they return in September is the worry. That is why people are bailing now vs Sept 29.... 2007/1929... We won't know what is in those monster omnibus bills until December...

Congress runs away to hide for month of August so they can return and berate the Iraqi Parliment for not doing the proper things legislatively before they left for their August break... Ironic? Humorous? Sad?...Yes.

[DRaftervoi]

I disagree. The drops are not the sort that can be caused by small investors; Washington Mutual shed 8.75 billion dollars in value in the last three weeks (if you count the intraday low). That's institutional volume. Some institutions bailed on the Novastars and Countrywides in the Spring, I agree, but the sub-prime slime is now tarring a lot of other financial institutions, and it's ain't the dink investors that are shifting billions.

[AndyJ]

Good companies will ride this and come out still good. If you were someplace for a quick buck you shoulda pulled out in May. What has some scared in the Bear Sterns stuff... This is now a global market. The Fed has held interest rates steady. They didn't lower the rates nor did they raise em. No inflation to destroy savings, but pump up house values. The adults are at the helm...

Congress will be back to talk about higher oil taxes and lower production, Free Federal health insurance for parents making less than $82,000 and higher taxes on the Evil Rich... All of which will shake up the oil industry, the insurance industry and the pension and insurance funds (where does Private Equity/Hedge Fund money come from? Who are the Evil Rich? yep, retirees...) All of this while conducting 300 separate investigations of the White House and Alberto Gonzales and saving the troops in Iraq... (Almost makes one reach for a Lindsay/Brittany/Paris update...almost)

Free Markets work best for most people in the long run.