Yesterday's gains evaporate

Stocks returned to their sliding ways. Dow dropped 175, decliners over advancers 4-1 & NAZ was down 32. Reality about the banking crisis plus the president's speech last night did not inspire buyers to come back. Even last night following the nice gains in NY, Asian markets followed thru with a more mild up performance (Tokyo was up over 2½% primarily on the recent weakness in the ¥ which has dropped from 88 to 97 to the dollar). Today the Dow has no strong gainers, but 1+ point decliners include:

3M (MMM)
American Express (AXP)
Boeing (BA)
Caterpillar (CAT)
Chevron (CVX)
Exxon Mobil (XOM)
IBM (IBM) - down 2½
United Tech (UTX)


Banks have already given up half of yesterday;'s gains. The S&P 500 FINANCIALS INDEX is down 6:

Value 101.90

Change -5.67

% Change -5.3%

MLPs, REITs & junk bond funds are pulling back while VIX is up 1½. Commodities are fairly quiet.

There has been a lot of discussion about nationalizing banks. We are already there, it's just a matter of defining how much interference represents nationalization. Major banks which have obtained gov money (investments?) will now have to prove their credit worthiness. If the gov doesn't like what it sees, the gov will get more involved. To me, this looks like, sounds like & walks like nationalization.

• Big banks get ready for White House stress tests- AP

Last night on TV, a money manager who said he was up 75% last year, had interesting thoughts. He said last year there was no point trying to guess which ones of a handful of stocks would go up. They focused on short instruments & had an exceptional year while about everybody else was in mourning. Going forward, he said Dow has been trading sideways for 17 weeks. Last week it dropped, breaking the sideways trend (chart below shows what he was talking about). They are getting ready to short more anticipating the Dow could drop another 2-3K.


Dow Jones Industrials --- 6 months




Yesterday I discussed the Dow maxing out at 1K at the start of 1973, after which it had a terrible sell-off. However the long term track record has been surprisingly good. Starting from a high & ending at a low today, the compounded annual growth rate for the Dow is almost 6%. Not bad & should keep hopes alive that the economy will work its way out of this financial mess. Money can still be made by very smart investing.