Thursday, June 26, 2008

Down, Down and Down

Top Line: For the stock market, it was down mostly all day long. The news was negative on Wednesday evening and it kept on coming on Thursday morning. Surprisingly, the market didn't go down more than it did on Thursday. As bad as things are looking, there doesn't seem to be any Real fear and that's what we are looking for in order to get a rally. Yes, that's right.

After we had heard from RIMM on Wednesday evening, the US futures market was down and stayed down all night. Then when Goldman Sachs put C (Citigroup) on its "conviction sell" list, the market had no reason to go up at all. Of course, not be to outdone, the oil market jumped again probably because investors were trying to find a place to park some funds because the stock market as going to have a bad day.

Another item that caught the market's attention was FORTIS, a European company, yes, we've worked for that one, too, along with AIG and now ING. Anyway, FORTIS decided to eliminate a $2 billion dividend and substitute a call for improving capital. The company wants to dispose of some assets, say maybe about $13 billion. You might have guessed that this didn't do too much for the European stocks on Thursday and brought some angst to the already troubled US markets. FORTIS dropped about 20% on Thursday. And, AIG is firmly below 30 bucks a share at 28.09. Can someone please tell us when should buy it???

Bank of America (BAC), well, what can we say? Today the company closed at a price it hasn't seen since 2001. That Countrywide Financial purchase is looking downright ridiculous. When the deal was announced, we heard a lot of positives coming out of both companies. Those pronouncements are now being replaced with reality news like "B of A" is cutting 7500 jobs on Countrywide deal.

This evening, we are trying to assimilate the market's drop on Thursday. Yes, the prices were much lower but it really didn't feel like serious thoughts of selling were occurring. This was borne out in the small rise in the volatility indexes and what felt like modest changes in stocks. RIMM was down 13% on the day after Wednesday evening's announcement and the other three members of the FSI were down, too.

To recap the situation, Fortune, part of CNN Money, reported many of the news items that we would probably normally share. We are tired but enjoying the drop in the market. When we surprises to the downside, this is what it means. Wednesday, all the players were giddy buying stocks while today, those buyers were being hit with selling.

The Dow has broken through support with a vengeance but we still think the NASDAQ indexes need to catch up on the down side. Thursday's drop brought the Dow down 20% from its October highs. So, tomorrow's headline might read something like, "Now we're in a bear market". Please...

It's been a great week and month for us here at the Update and we hope you have had a good month, too. Back on Sunday evening.

FSI: 87.09 (5.7% drop Thursday and down 18% on the year)

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