Worldwide credit crisis

At first trading last night in overseas markets, New Zealand & Australian stock markets tumbled 3-4%. Asian markets followed with similar declines in the next few hours. Dow futures were down 100, later falling to -160. One example (among many) of chaos in markets which may have gotten lost given all the news coming out, last night Korea said it would use its national reserves to help prop up their banks! I lost track of how many big European banks (LAST NIGHT) were on the brink of failing only to bailed out with multi $B rescue packages. This morning, European markets were down around 5% and Dow futures were down 200+.

Markets have continued to sell off in NY amidst all this chaos. Dow is down 487, decliners over advancers 25-1 (probably a record) & NAZ was down 112. I won't drone on with how each index is getting clobbered, you get the idea! But Dow deserves special mention. The chart below shows when Dow cracked 10K about 9½ years ago. That was a big deal, hats were given out at the NYSE to celebrate. Now it broke 10K once again, but this time going the wrong way.


Dow Jones Industrials -- last decade




Oil is taking a hit, below 90 (8 month low). Below is a chart for OIL, an ETF which tracks oil, showing the 8 month low:

CLX08.NYM

Crude Oil Nov 08..

89.84..

4.04 (4.3%)

OIL -- 1 year





Not all markets are suffering. Gold has had a great year & is rallying because of its defensive nature as shown in the chart for GLD, an ETF tracking gold:

GCV08.CMX

Gold Oct 08..

868.80..

39.90 (4.8%)

GLD -- 1 year




It's hard to know where to begin with all this chaos in financial markets. It looks pretty gloomy & probably will get worse. General Electric (GE), Dow stock & an S&P 500 Dividend Aristocrat, sold stock with a 6% yield to new investors a couple of days ago. They're already down almost 2. Central banks around the world are supplying liquidity, i.e. money, to banks trying to help them struggle through these times. There is wishful thinking about a surprise rate cut by the Federal Reserve. Sounds good, but lower interest rates won't do much to solve banking problems when they aren't lending to each other, not to mention customers, in the first place.

I have to be honest, Chicken Little called me last night. I said while these are probably the most difficult times financial markets have gone through since the depression, we will get through them. Those who are believers will see fire sale prices for securities as providing opportunities to buy for the future. One excellent source of ideas is the S&P 500 Dividend Aristocrat group, members of the S&P 500 which have a minimum of 25 consecutive years of higher annual dividends. Some go back 50+ years. There were 59 on the list based a recent count. This list provides names of companies worth holding for the long term, i.e. very smart investing. Some have dropped off recently, as with all investments, careful selection is always in order.