Financial meltdown continues

Asian stocks followed the US lead last night, getting punished badly. In their early hours of trading, Dow futures were trading up a tad (not worth mentioning normally but in today's world a tad is a pretty big deal). This AM final figures for Asian markets were in, they had one of their worst days ever. In response, central banks banks are pumping in money & doing what they can to be helpful. After more announcements this AM, Asian stock futures are trading up a couple percent but even that means little for markets down 40+% from recent peaks (Shanghai market is doing much worse!). Worries in Asia are less about bad loans, more about a sinking world economy which will buy less from Asia.

Early this AM, the Federal Reserve announced a ½ point rate cut. Swell! When banks aren't lending, a rate rate will only send a symbolic message. Initially Dow futures were up over 200 (after recording the third WORST 5 period in history), but that evaporated quickly. Below is ONE UGLY CHART for the last 2 weeks & the chart below shows how devastating the damage has been in the last 5 weeks:


Dow Jones Industrials -- 2 weeks





Dow Jones Industrials -- 3 months




Today, Dow is down 73, decliners over advancers 4-1 and NAZ pulled back to break even. The S&P 500 FINANCIALS INDEX is essentially even at 211 (I think Bloomberg TV said that's an 11 year low). I hate to drone on, but the Alerian MLP index is down 22 to 156, maybe heading for their starting point of 100 13 years ago. They dropped over 100 points in the last 5 weeks (eye popping for LOW BETA securities):


Alerian MLP Index -- 1996 to today




There are a few winners. Caterpillar (CAT), a Dow stock, is up over 2, but already fading off its high an hour ago. Oil is below 90 (remember when it was 147 a couple of months ago?) on worries about the global economic slowdown. Money from stocks sold has to go somewhere, a flight to safety in gold and US Treasuries. The 10 year T-bond yields 3.49% & the 90 day bill yield is below 1% annualized. Investors buying T-bills are paying a few pennies less than $100 for a Treasury bill to get $100 in 3 months.

CLX08.NYM

Crude Oil Nov 08

....88.46

... 1.60 (1.78%)

GCV08.CMX

Gold Oct 08

...904.00

... 25.60 (2.91%)

The financial meltdown is bad, here are just a few of the ugly stories:

•Fed, ECB, BOE Cut Rates in Unprecedented Response to Combat Credit Freeze
•Treasury Will Offer More Debt Amid `Severe Dislocations' in Credit Markets
•California, States Are Seeking Inclusion in Fed's Commercial Paper Program
•GE, American Express Reduce Commercial Paper Yields After Global Rate Cuts
•Iceland Drops Currency Defense, Scraps Glitnir Purchase as Crisis Deepens
•Putin May Use Financial Meltdown to Boost Influence as Iceland Seeks Loan


Financial problems bleed thru to the rest of economy. Sep retail were disappointing, to say the least. Lousy back to school sales in Aug, followed by weak Sep sales are pointing to a very bad holiday sales season. One small example of poor retail sales, I see lower prices on HD TVs. Not scientific, but it looks like even this hot product is feeling a pinch which extends back to the Asian manufacturers.

• Retailers report weak September sales- AP

Earnings is starting with lower Q4 earnings reported last night by Alcoa (AA), Dow stock. General Electric (GE) reports what will be disappointing earnings on Fri as they are getting hit hard by the financial crisis in the financial businesses. The general belief is that lower earnings will not just be reported by financials, but industrial & service companies will also feel a lot of pain.

My latest up (written a couple of days ago which seems like ancient history now) is linked below. Fundamental values remain, they are long term investments:

MLPs Still Attractive After Recent Selloff

We all have to keep a stiff upper lip, grin & bear it. Try to think long term thoughts.