This is a permanent decline, a permanent deleveraging. These losses won't be made up in days or months. They will never be recovered. As such, anyone holding stocks needs to sell them or lose what little they have. It is the worst case scenario. People say - when the market is falling don't sell. Well, don't sell unless you have cause to believe it will recover. This is one of those worst case scenarios. And on its way - stagflation: high prices and a contracting economy (unemployment, low demand). It's here. We said it was coming but everyone dismissed it as just 'doom and gloom'.
The selling was so extreme that only 67 stocks rose on the NYSE -- and 3,155 dropped. That's a telling sign considering the stock market is considered a leading economic indicator, with investors tending to buy and sell based on where they believe the economy will be in six to nine months.
Monday's steep decline on Wall Street indicates that investors are becoming more convinced that the country is leading a prolonged economic crisis that is spreading to other nations. Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.
Wall Street suffered through another traumatic session Monday, with the Dow Jones industrials plunging as much as 800 points and setting a new record for a one-day point drop as investors despaired that the credit crisis would take a heavy toll around the world. |
clipped from biz.yahoo.com
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