Financial chaos continues

In the panic to sell financial, the flight to quality is going extremes. The US Treasury 90 day bill rate is under 1%, the lowest price since 1954. The Treasury 10-year bond rate is at 3.4%, again - very, very low. By way of comparison. High yield bonds yield over 14%, many REITs yield above 10%, the MLP Alerian index is 9% (double digit yields are available on individual issues), not to mention very high yields on securities issues. Bank of America (BAC) has a dividend yield of 9% (although all banks are suspicious these days).

All investment banks are under a very black cloud. Goldman Sachs (GS) is down 26 after being down more than 30 earlier & Morgan Stanley (MS) is almost 9 after being down 13 earlier. They each had their worst day on very ugly credit crisis worries. Suspicious investors are imagining the worst. The entire securities business is going through a wrenching experience, later on we will call this "history." Meanwhile gold is having a stellar day, rising 70 to 850 after reaching an earlier high of up 90. Not a bad day to own gold! Oil was up sharply after it had fallen almost 50 from its peak a couple of months ago.

CLV08.NYM

Crude Oil Oct 08

__97.21

__ 6.06 (6.7%)

In this kind of environment stocks sold off big time (as shown in the Bigcharts widget). Dow tumbled 217, decliners over advancers 9-1 and NAZ was down 65. The S&P 500 support level of 1200 gave way, it's now 1157, down 56.
Leading the decline was:

S&P 500 FINANCIALS INDEX

Value__244.54 ...Down__(23.89).... Down__(8.9%)

It is now at headed for the 232 Jul 15, the more than 5 year low!


S&P 500 -- 2008 YTD





The Alerian MLP index dropped (shown on the right) to another multi year low, down 11 to 221 (this is a low beta index!).

There may be a lot who are trying to Chicken Little's phone number. Try to relax. Congress will begin hearings in a couple of days. That does not sound promising. Hopefully the markets will adapt to new legislation that is coming. These are unusually brutal times, but reason will win out. It's best to hunker down & prepare for outstanding buying opportunities which will come.