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Major stock market indexes fall to 1997 levels

Matter-Eater Lad

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NEW YORK (AP) -- Wall Street has turned the clock back to 1997. Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday.


The Dow Jones industrial average tumbled 251 points to its lowest close since May 7, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997. It's as if the decade's dot-com surge, collapse and subsequent recovery never occurred.


The Dow is just over 100 points from 7,000. Both indexes have lost about half their value since hitting record highs in October 2007.


"People left and right are throwing in the towel," said Keith Springer, president of Capital Financial Advisory Services.


Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.


Although the government has said it doesn't want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They're also worried that banks' losses will keep escalating as the recession sends more borrowers into default.


"The biggest thing I see here is the incredible pessimism," Springer said. "The government is doing a lousy job of alleviating fears."


The Treasury and other agencies issued a statement after The Wall Street Journal reported Citigroup is in talks for the government to boost its stake in the bank to as much as 40 percent. Analysts said the market, which initially rose on the statement, wanted more details of the government's plans.


"It's only a very partial picture of what we may get," said Quincy Krosby, chief investment strategist at The Hartford. "This proverbial lack of clarity is damaging market psychology."


Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.'s new chief executive plans to reorganize the company. But the selling came across the market as pessimism about the recession and its toll on companies deepened.


"There's no where to hide anymore," said Jim Herrick, director of equity trading at Baird & Co.


The market's decline extends massive losses from last week when the major stock indexes tumbled more than 6 percent. While falling to their 1997 levels, the major indexes plunged through the lows they reached in late November, at the height of the credit crisis.


"There's no main driver of the down day," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "There's just so much skepticism in the overall market and (the question is) is the government doing proper things to get us out of this problem. Obviously the stock market is voting no."


The Dow dropped 250.89, or 3.41 percent, to 7,114.78. It last closed this low on May 7, 1997 when it finished at 7,085.65. The Dow hasn't traded below the 7,000 mark since October 1997. The index is down 14 percent over the past 10 sessions.


The Standard & Poor's 500 index fell 26.72, or 3.47 percent, to 743.33. It was the lowest close since April 11, 1997, when it ended at 737.65.


When the indexes were last at these levels, they were in their ascendancy, climbing amid the dot-com boom. But 1997 was also the year that saw stock prices later plunge amid a growing financial crisis in Asia. Far away from Wall Street, it was the year that the U.S. first heard the name Monica Lewinsky, whose relationship with President Bill Clinton led to his impeachment and trial. And it was the year that the world was stunned by the death of Britain's Princess Diana, on Aug. 31.


On Monday, the S&P 500 did close above its Nov. 21 trading low of 741.02. But the 14-month recession has decimated the major indexes: The Dow is down 49.8 percent from its record highs of October 2007, while the S&P 500 index is down 52.5 percent.


Detrick warned that a move below the S&P's Nov. 21 low could set off "violent selling" as even more confidence drains from the market.


The technology-laden Nasdaq composite index dropped 53.51, or 3.71 percent, to 1,387.72.


Investors looking for a bottom also dumped smaller stocks. The Russell 2000 index of smaller companies fell 16.38 or 3.99 percent, to 394.58.


Declining issues outnumbered advancers by more than 6 to 1 on the New York Stock Exchange, where consolidated volume came to 6.35 billion shares compared with heavy volume of 8.12 billion shares on Friday.


Morgan Smith, investment counselor for Burns Advisory Group, said investors are now pushing out their expectations for a recovery in the industry until after this year.


"Everyone is trying to grasp at some type of bottom," Smith said. "The market is just trying to figure out if it has priced in a worst-case scenario."


Among tech stocks, Hewlett-Packard Co. fell $1.96, or 6.3 percent, to $29.28, and Intel Corp. dove 70 cents, or 5.5 percent, to $12.08.


Other big losers included General Electric Co., which dropped to a 14-year low of $8.80, but ended down 53 cents, or 5.7 percent, at $8.85. Aluminum producer Alcoa Inc. tumbled 48 cents, or 7.6 percent, to $5.81.


Some financial stocks managed to gain, including Citigroup, which rose 19 cents, or 9.7 percent, to $2.14, and Bank of America Corp., which gained 12 cents, or 3.2 percent, to $3.91.


Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.77 percent from 2.79 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.28 percent from 0.26 percent Friday.


The dollar was mixed against other major currencies, while gold prices fell.


Light, sweet crude fell $1.59 to settle at $38.44 per barrel on the New York Mercantile Exchange.


Overseas, Britain's FTSE 100 fell 0.99 percent, Germany's DAX index fell 1.95 percent, and France's CAC-40 slipped 0.82 percent. Earlier, Japan's Nikkei stock average fell 0.54 percent.




[ame=http://www.youtube.com/watch?v=2iCRNBGQU00]YouTube - True News 21: What To Do About the Coming Depression[/ame]

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Fantastic FDR video.


Nick, next time you get a chance pop online, I've got a cool story to tell you. (I was in jail these past few days for a crime I didn't commit...)


In 2009, a member of the public was sent to prison by the court of Bush for a crime he didn't commit. This man promptly escaped from a maximum security stockade to the Los Angeles underground. Today, still wanted by the government, he survive as soldiers of fortune. If you have a problem, if no one else can help, and if you can find him, maybe you can hire... The S-Team.

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In 2009, a member of the public was sent to prison by the court of Bush for a crime he didn't commit. This man promptly escaped from a maximum security stockade to the Los Angeles underground. Today, still wanted by the government, he survive as soldiers of fortune. If you have a problem, if no one else can help, and if you can find him, maybe you can hire... The S-Team.




My story is far less exciting, unfortunately. But I was arrested for "hindering an officer", because I supposedly picked my brother up from a party where there was underage drinking, and the cops were in the process of arresting him.


When the cop cuffed me, he said I was being arrested for "obstruction of justice", at which point I thought to myself, "Holy shit, isn't that what they charged Scooter Libby with?" :D


I guess the judge reviewed the charge and corrected the cop, because if you look up "obstruction of justice" on Wikipedia you can see that the only way to be charged with that is if you're a government official, and I'm just a citizen.

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So you were seriously in jail for this? How long exactly?


2 days and 2 nights.


Yeah, it was real jail. Not just a holding cell. So... orange jumpsuit, sleeping on concrete floor, eating crappy food, etc. But we had our own separate shower stalls, that was nice. I met a bunch of awesome guys in there, though. My roommates were two illegal immigrants, named Carlos and Orlando. Orlando was caught with two fake IDs on him (you need a social security number to get a job in America), and he had a picture of his girlfriend and daughter who he was trying to support by sending them money. Carlos was there for paying a guy to kill his co-worker. I know it sounds like shit but honestly everybody I met in there had a good heart, and a couple of them were innocent of any wrongdoing (like myself). But if they committed a crime, they readily admitted it.


I spent a lot of my time playing chess, watching The Price is Right (we had a small TV in the common area), and teaching my Mexican roommates tongue-twisters in English so they could practice their pronunciation of certain words. :D

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Nick, I just bought heavily into this ETF: http://finance.yahoo.com/q?s=TNA


Figured you might be interested in my recent trading activity. I think I agree with you that as we near 7000 there's some technical support, and I'm counting on a bounce in the markets on Monday...


I think we'll see a large bounce Monday. Did you see the last hour in the Dow today? There was some major market manipulation going on, but it was not enough to overcome the bad news.


I'm looking into TNA right now. What do you think about XLE? http://finance.yahoo.com/q?s=xle


Btw you'd be proud of me, My friend has tens of thousands in the stock market and she's only 18. I told her a couple of weeks ago to get out of GE because she owned a lot, and it went down from 12 to around 9 dollars now. She didn't listen though.

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I'm not sure of a bounce on Monday, because with the technical support here you could also see another steep drop, depending on trader sentiment. But I'm certain that medium-term (3 months) we'll see at least one big rally. Not a rally of denial, but just a technical rally.


Your GE story is funny, I remember hearing Peter Schiff compare it to a hedge fund, and I totally agree. How could you own something that buys commercials touting "ecomagination"? What the hell is that? :laugh3: I'm sorry she didn't listen to you, just don't rub it in her face! ;) If she's attractive ell her you've got some good picks but the only way you can let her know them is if she goes out to dinner with you.


The energy ETF looks OK on a cursory glance, a 7 PE is fine long-term. It's lost half its value since the high last year, though... be wary of trying to catch a falling knife. (I should probably take my own advice.)

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Gordon Brown has written an editorial explaining his ideas about the situation...


March 1, 2009

The special relationship is going global

Gordon Brown


Historians will look back and say this was no ordinary time but a defining moment: an unprecedented period of global change, and a time when one chapter ended and another began.


The scale and the speed of the global banking crisis has at times been almost overwhelming, and I know that in countries everywhere people who rely on their banks for savings have been feeling powerless and afraid. But it is when times become harder and challenges greater that across the world countries must show vision, leadership and courage – and, while we can do a great deal nationally, we can do even more working together internationally.


So now is the time for leaders of every country in the world to work together to agree the action that will see us through the current crisis and ensure we come out stronger. And there is no international partnership in recent history that has served the world better than the special relationship between Britain and the United States.


It is a relationship that has endured and flourished because it is based not simply on our shared history but on the enduring values that bind us together – our countries founded upon liberty, our histories forged through democracy and an unshakeable belief in the power of enterprise and opportunity.


But if it reflects our values and our histories, this special relationship is also a partnership of purpose, renewed by every generation to reflect the challenges we face. In the 1940s it found its full force defeating fascism and building the postwar international order; in the cold war era we fought the growth of nuclear weapons and when the Berlin Wall fell we saw the end of communism. In this new century, since the horrors visited on America in 2001, we have worked in partnership to defeat terrorism.


Now, in this generation, we must renew our work together once again. A new set of challenges faces the whole world, which summons forth the need for a partnership of purpose that must involve the whole world. Rebuilding global financial stability is a global challenge that needs global solutions. However, financial instability is but one of the challenges that globalisation brings. Our task in working together is to secure a high-growth, low-carbon recovery by taking seriously the global challenge of climate change. And our efforts must be to work for a more stable world where we defeat not only global terrorism but global poverty, hunger and disease.


Globalisation has brought great advances, lifting millions out of poverty as they reap the benefits of economic growth and trade. But it has also brought new insecurities, as this – the first truly global financial crisis – underlines. Globalisation is not an option, it is a fact, so the question is whether we manage it well or badly.


I believe there is no challenge so great or so difficult that it cannot be overcome by America, Britain and the world working together. That is why President Obama and I will discuss this week a global new deal, whose impact can stretch from the villages of Africa to reforming the financial institutions of London and New York– and giving security to the hard-working families in every country.


I see this global new deal as an agreement that every continent injects resources into its economy. I believe that central to this new investment is that every country backs a green recovery for the future, that every country that wishes to participate in the international financial system agrees common principles for financial regulation, coordinated internationally, and changes to their own banking system that will bring us shared prosperity once again. And that, together, we must agree to reform the mandate and governance of global institutions to recognise the changing shape of the world economy and the emergence of new players.


It is a global new deal that will lay the foundations not just fora sustainable economic recovery but for a genuinely new era of international partnership in which all countries have a part to play. This programme of internationally coordinated actions includes six elements:


First, universal action to prevent the crisis spreading, to stimulate the global economy and to help reduce the severity and length of the global recession. Second, action to kick-start lending so that families and businesses can borrow again. Third, all countries renouncing protectionism, with a transparent mechanism to monitor commitments. Fourth, reform of international regulation to close regulatory gaps so shadow banking systems have nowhere to hide. Fifth, reform of our international financial institutions and the creation of an international early warning system. And last, coordinated international action to build tomorrow today – putting the world economy on an economically, environmentally and socially sustainable path towards future growth and recovery.


I have always been an Atlanticist and a great admirer of the American spirit of enterprise and national purpose. I have visited America many times and have many friends there, and as prime minister I want to do more to strengthen even further our relationship with America.


Winston Churchill described the joint inheritance of Britain and America as not just a shared history but a shared belief in the great principles of freedom and the rights of man – what Barack Obama has described as the enduring power of our ideals – democracy, liberty, opportunity and unyielding hope. Britain and America may be separated by the thousands of miles of the Atlantic, but we are united by shared values that can never be broken. And as America stands at its own dawn of hope, I want that hope to be fulfilled through us all coming together to shape the 21st century as the first century of a truly global society.


It's remarkable to see such totalitarian language couched in the beautiful reminiscence of liberty. The degree of cognitive dissonance necessary to enjoy (or even to understand) this editorial borders on a heroin addict's.

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Yes it was. Thank God I didn't pull the trigger on that trade yet. I would have lost nearly 17%... :P


Nick, I think you'd like this guy's website: http://www.thekirkreport.com


He trades the markets for a living and he links to the stuff he's reading each day. I've learned a ton from him.


Thanks, I'll check it out. Question about Scottrade, did you have to go to the office and show them your drivers license before you could open an account? My mom might cash in her 403b and have me handle her investments.

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Thanks, I'll check it out. Question about Scottrade, did you have to go to the office and show them your drivers license before you could open an account? My mom might cash in her 403b and have me handle her investments.


Nope I never went to an office. You just fill out some forms and I guess they can do their own background check. Now the process of rolling over a 403b might require you go to the office, but I'm not sure...

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I just read a article from Marketwatch.com about 300 dollars a barrel for oil in a few years. I don't see it going that high, but maybe 100 or 120 in a few years. I think oil right now is an amazing buy and so is silver.


China will be the driving force for Oil, gold and silver in the next few years. Any thoughts Jay?

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I just read a article from Marketwatch.com about 300 dollars a barrel for oil in a few years. I don't see it going that high, but maybe 100 or 120 in a few years. I think oil right now is an amazing buy and so is silver.


China will be the driving force for Oil, gold and silver in the next few years. Any thoughts Jay?


Depends on when you expect the recovery to be. But yeah, at this price point (and as a long-term investment) that's where I'd put a lot of my portfolio. It's bordering on foolproof, and that's what makes it a little scary to me. Oil isn't like a stock, so the downside could be another 50% or so. Just keep that in mind - you're probably better off not selling for a few years anyway.

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Well can oil go any lower in price?


Of course, if the output increases. The odds of that are low, however, because oil exporting states prefer to sell the stuff for a higher price. I'd say the downside exists, though. 50% is what I'd cap it at. Believe it or not, that's less scary than the downside potential I see for the US stock market.


Companies are fast to pass the rising cost of oil onto customers but when the price collapses they ain't too quick at reducing the prices.


Well this has more to do with refiners trying to make a quick buck than the actual oil suppliers. But if you discount inflation, the price of gasoline (in America) is generally where it should be while oil is at this price per barrel. Here's an article on the demand for oil in the US now: http://www.cnbc.com/id/29429395

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It depends if the Arabs decide to turn the screw on the taps to decrease supply to force prices up.


Or the damned Canadians. ;)


Or the Russians, Venezuelans, Mexicans, or even our own Obamanation. There are lots of places to get oil.

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Oil supplies will be very low, and when a global recovery comes China will require a lot of oil sending the prices up. But also what about if Israel attack Iran, I think oil would sky-rocket. Then you have the fact that all these oil producing nations are going bankrupt so they'll do everything possible to get oil to at least 80 a barrel. Even if oil only goes up to 100 a barrel in 3 years, I think it'll be a great investment now.

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