October 09, 2008

The Great Panic of 2008 is here. And people will read, learn and analyze this one for the rest of time.

This is a pure and total loss of confidence folks. A loss of confidence in our markets. A loss of confidence in our leaders. A loss of confidence in our Justice Department, our media and our laws. And a loss of confidence in capitalism itself.
The actions of our incompetent, clueless and corrupt leaders these past few weeks have made this crisis and crash worse than even I expected. Now the whole world is New Orleans. Now the world sees the incompetence, cronyism and corruption that came to infect Washington D.C., and the greed that infected the world
Get popcorn. But get real. The events of the past few days will change your life direction. The world will never be the same.

From Websters:

Main Entry: panic

Function: noun

Date: 1708
1 a: a sudden overpowering fright ; also : acute extreme anxiety

b: a sudden unreasoning terror often accompanied by mass flight panic in the streets>

c
: a sudden widespread fright concerning financial affairs that results in a depression of values caused by extreme measures for protection of property (as securities)

From
Brett Steenbarger, Author of The Psychology of Trading, on TraderFeed:

It looks like the chart of a fallen bank, but it's actually the daily price chart of the S&P 500 Index futures as of this morning's pre-opening trade. Market history is replete with instances of stock market panics. Since the Great Depression era, we've had panicky periods of selling, but no labeled "Financial Panics".

Panic, psychologically, connotes a loss of orientation and an overwhelming sense of anxiety, just as Depression connotes hopelessness and an overwhelming sense of loss.

It is interesting that we use these psychological terms to label periods in financial history, but it is fitting.

When institutional investors lose confidence in the financial system, what else can they do but hit the panic button, sell their assets, and do their best to preserve capital?

When individual investors see their retirement assets--from their homes to their bonds to their stocks--down more than 20% and in seeming free-fall, it's understandable that psychological depressions become financial ones.

42 comments:

brokersleaveyoubroke said...

I wonder what it is about October that makes it the month for crashes.

Honica Jewinski said...

GLORY, GLORY HALLELUJAH...
GLORY, GLORY HALLELUJAH!!!
GLORY, GLORY HALLELUJAH, THE LEMMING MARCHES ON!!!

Anonymous said...

Loss of confidence in capitalism?

You're right that people have lost confidence in capitalism because they don't understand the difference between capitalism and outright fraud.

Get your Chairman Mao and Barry Obama t-shirts people and celebrate the coming SOCIALIST REVOLUTION!!

keith said...

"People don't recover from panic until they feel security; they don't recover from depression until they perceive hope. It will take more than a few government bailout announcements to instill renewed trust in markets and the financial system."

http://traderfeed.blogspot.com/2008/10/financial-panic-of-2008.html

Based on this, I think we hit bottom on election day folks.

Americans are going to choose hope. You may agree, you may disagree, but Obama sells hope. And that will be the bottom. Hope. Change. Stability. Certainty.

Take it to the bank.

Until then, carnage.

keith said...

When the laws of the nation go unenforced, when fraud runs rampant, when get-rich-quick schemes overtake work, well, then this is what you get.

What a shameful eight years. What a complete and total disaster for America.

It didn't have to be this way. But that's what America chose.

Now we all pay the price.

Thank you America. Nicely done. Great job.

Anonymous said...

Where is the justice department?

Oh ya, that studid mexican is in charge. Well, that figures.

Anonymous said...

SOME CRASH!

DOPES

...oops, I guess it really is a pretty big crash...I'll shut up now.

anon916 said...

Congratulations HPers, it's official. You now get to trade in the tin foil hat for a fancy fedora one.

keith said...

Holding aapl and watching it tank, but without much of a care. Wake me up in 2015 when I'd like to possibly sell it and let me know the price then

I thought Cramer's latest advice was good - if you need money for the next five years to NOT be stupid enough to have it gambled in the market. And you should also assume you'll have no income for five years too. Then, if you have cash to invest, invest wisely. Invest for the long term.

That said, the hedge funds are making minced meat out of this market. You're watching an epic battle being fought out there, and this market now has absolutely nothing to do with the fundamentals. It's all about the hedge funds, and it's a war.

Anonymous said...

Wait till Friday.... more pain before the long weekend. LOOK OUT!!!!!

curtstest said...

Obama sells hope

Maybe. He sure used to, but this campaign has taken its toll on that message. The only hope he's selling right now is anti-Bush. But if that's all he's got, people are going to get disillusioned real quick. He's going to have to deliver on something fast.

And, BTW, did you know he's purchased 1/2 of prime time TV on OCTOBER 29th, of all days?

http://tinyurl.com/4dqhva

keith said...

Look at the P/E on some of these stocks and indices and tell me that panic is not happening.

Profitable companies with tons of cash on the balance sheet and good trends trading at a P/E of 4 is just stupid.

You'll never see anything like it again in your lifetime. Even though they can go lower still during this epic hedge fund battle, P/E's of 4 on quality companies is a joke.

If I wasn't so scared and disgusted, I'd be buying with both fists.

Not yet.

Anonymous said...

The One World Government and the One World Money System---comming to a country near you soon.

Revelation Happens.

keith said...

Wow. I hadn't followed Alcoa. P/E of 5, made $3 billion last year, market cap of $10 billion, 4% dividend, trading like the world will never need another metal again.

Like ACH in China. Trading like we're going straight back to the stone age.

Hmmm... Maybe we are. But damn, never seen anything like it. Ever.

Anonymous said...

AS GOES GM SO GOES THE U.S...ER OUT OF BUSINESS?

old geaser said...

Does anyone have any depends?I am wipeing the shit off my legs as we speak.This market is unwinding faster than I ever thought.I am going to celebrate with a trip to red lobster for all you can eat shrimp.this could be my last meal.

bitterrenter said...

When do we get to start rounding up conservatives and sending them to work camps? When do we start burning down the conservative christian churches? How soon until we start confiscating the wealth of the top 1%?

C'mon, I want things to get good!

Anonymous said...

WENT DOWN TO THE SOCK PUPPET CLUB BANK LOOKING FOR HUMOR IN THE MIDST OF THE DEPRESSION AND..ER. O GOD NO FORGET ABOUT IT............................. YEAH THAT ALCOA SCREAMED BUY. BUY....

BMW Driving Sex Machine said...

I'm sure like clockwork, idiot unionheads at GM are going to threaten to strike next week claiming they are overworked and underpaid.

Anonymous said...

2006: Dow well above 10K and Republicans in power

2008: Dow at 8500 and Dems in power.

DOPES!!

Jeff said...

All predicted.

the-end.com

Anonymous said...

Hmm Obama leads in the polls and dow is down 1500 points in two weeks.
Nothing to see here folks, just keep singing hope and change and watch as it goes down to 4000 by Jan 20th.

Anonymous said...

It's all about the financials! You can't hide losses on a bank's balance sheet and expect investors to buy the stock. 2/3s of the stock market is financials so more pain is coming.

However, the real problem is that banks sold mortgages in tranches all over the world and it takes months to find the portion of the debt in these tranches for which they want to foreclose.

Imagine being the bank and having to go find all the pieces of a mortgage sold in many tranches but not easily identifiable. Plus these mortgages, now (CDOs), also became collateral for derivatives at about 16 to 1. So which investor gets the money when the bank wants to foreclose?

We are talking many trillions of dollars in derivatives. This is a bigger problem than imaginable!

I think it is confession time!

slycapital.com said...

I agree with your stock calls for once Keith.
I bought some calls today for the first time in a year and a half. It is money I can afford to lose but it's just too tempting.
The best rallies come during bear markets.

Anonymous said...

Hey DOPES!

The last time I checked, President Bush in NOT a Democrat, and IS in charge of the GOP criminal network and the USA.

Why are you such an as*wipe? Oh, never mind DOPES!

Susan said...

I agree Keith, I think Election Day - if it truly embodies "hope" will be the day things start to get better (we would have hit bottom).

Even if Obama is leading in the polls, it'll take till election day when we know who is actually in office. McCain is spreading his smears and throwing with the last of what he's got.

k.w. - Southern Ca. said...

A Fedora would be nice, but in the current economy, making Fedora Hat's and still providing decent wages and employee benefits is no longer possible.

I'll be content with a tinfoil hat, while that lasts as well.


anon916 said...
Congratulations HPers, it's official. You now get to trade in the tin foil hat for a fancy fedora one.

NONE OF THE ABOVE said...

I told you both parties will screw us over.

Oh look, dow's dropping AGAIN. Look out below!

WTF1920 said...

You know, it's getting to the point of where I dread each and every day. I'm waiting for the day when my boss calls me up at home and says, "Don't bother coming to work tomorrow-we're closed."


It's only a matter of time I'm sure.

Anonymous said...

Whatever the plan was that Paulson had ,it didn't work .

Anonymous said...

Please, enough with the cinfidence BS. The problem is not with some subjective mindset called confidence, it's the Collateral stupid! The Collateral is damaged. The Collateral is impared. The Collateral damage is everywhere. It's the Collateral damage stupid. There's no way to repair the Collateral except drop money from hellocopters, Get it?

Anonymous said...

My fellow Americans we must come together in a time of need. This weekend be brave and go shopping with your family and friends. It's time for us to get the world's economic engine humming again!

jim said...

"I wonder what it is about October that makes it the month for crashes."

Its cold. People pull their money out for the same reason squirrels hide nuts.

jim said...

"
Based on this, I think we hit bottom on election day folks."


Quite possibly. Good bet at least. I would say we certanly will not see any kind of recovery start before then.

Anonymous said...

Are you sure about Bush not being a democrat?

He seems to have done everything he can possibly do, to ensure the Democrats win these elections?!?

Anonymous said...

Keith, Roubini sums up nicely why Alcoa and other industrial stocks are tanking:

"And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero"

derivs said...

Scariest part of the picture. Those moing averages haven't even crossed to the downside confirming a sell signal. Crazy enough this could go on.

Lost Cause said...

The month of October still just beginning.

neo con-artists said...

'...people have lost confidence in capitalism because they don't understand the difference between capitalism and outright fraud.'

Once upon a time, there was a quaint notion that a capitalist system included properly enforced regulations to compel its particpants from engaging in fraudulent activity.

Of course, that was way back in the good old days...8 yrs ago.

Mammoth said...

BrokersLeaveYouBroke said...
"I wonder what it is about October that makes it the month for crashes."
-----------------------
October is the month when you plant your Tulip Bulbs!

-Mammoth

Skaven said...

> Look at the P/E on some of these
> stocks and indices and tell me
> that panic is not happening.

Keith, you're missing the point. Those P/E's are based upon profits from 2Q. Wait until you see those P/E's with today's profit numbers.

Read the news, inventories are literally DOUBLE right now. Profit is going to tank in most sectors.

It's not time to buy... yet.

Anonymous said...

:It's not time to buy... yet

Well in this market, you never truly buy. That's not a strategy when a bear market is in full effect.

You buy a long ETF, for the half-dead cat bounce and then sell and buy a short ETF, when the next leg down starts up again. In essence, you keep your strategy geared towards the short side on the major tech equities during each rally blow off, from here forth.

This is a bear market folks; it eats those who buy on the dips and holds.