The Markets Are Terrified: Should You Be?

[KenH]

The Markets Are Terrified: Should You Be?

Posted Sep 29, 2008 07:38pm EDT by Aaron Task

The "sum of all fears" scenario became reality Monday after the House rejected a $700 billion bailout package.

The Dow suffered its largest-ever point decline in history, 778 points, while the S&P was off 8.75%, its worst decline since 1987, and the Nasdaq lost over 9%, which will certainly grab headlines -- and rightfully so.

But the real crisis remains in the credit markets, as Bloomberg details:

• Rates on three-month Treasury bills declined 55 basis points to 0.29%, not far above the levels hit on Sept. 17 when they hit their lowest level since WW II.
• The three-month London interbank offered rate (LIBOR) -- a key measure of lending rates between banks -- climbed to 3.88%, the highest level since Jan. 18 and up from 2.81% a month ago.
• The so-called TED Spread -- the difference between what banks and the Treasury pay to borrow for three months, widened to 3.59%, the most since Bloomberg began compiling data in 1984. The TED Spread was 1.10% a month ago and has averaged 0.56% over the past five years.

In plan English, those figures mean banks are extremely reluctant to lend to each other, which means they're not going to lend to you and I as consumers, or businesses either. The Fed is injecting tremendous amounts of liquidity into the financial system to get banks lending again, to little avail so far.

This isn't just a long-term concern: corporate America relies on overnight lending and short-term commercial paper markets, and an inability to tap those sources of liquidity could result in mass layoffs in the "real" economy, which is something to fear.

Treasury Secretary Hank Paulson warned about such dire consequence before, during and after the House vote on the bailout package Monday.

"Markets around the world are under stress and that reduces the availability of credit that businesses across America depend on to meet payroll and to purchase inventories," Paulson said Monday afternoon. "We've got much work to do and this [rescue package] is much too important to simply let fail."

On Monday, investors got a taste of just how important the absence of a plan can be. I wouldn't recommend anyone sell after a day like Monday but wouldn't be in a rush to buy stocks either. Monday's point decline was the worst in the Dow's history but it didn't make the top 10 on a percentage basis. Notably, three of the Dow's five worst percent drops occurred within a 6-week period in 1929 and two of the top 10 occurred in October 1987, meaning things can get worse and really big declines tend to occur in clusters.

- http://finance.yahoo.com/tech-ticke...hould-You-Be?tickers=^DJI,^GSPC,^IXIC,SPY,DIA

 

[Bro. Curtis]

Nope. My treasure is in Heaven.

 

[LadyEagle]

Yep, so is mine. Jehovah Jireh.

 

[Major B]

Yep, so is mine. Jehovah Jireh.

Remember the context (Gen 22:1-14) He provides Himself as our substitute--the Ram held by His strength, not by His weakness...

 

[ccrobinson]

I'll tell you how terrified I am.

I'm buying a house next Monday.

 

[annsni]

Nah. I read the book. I know how it ends.

 

[Bro. Curtis]

I just applied for another big extension on my business credit. raying:

 

[LeBuick]

Nah. I read the book. I know how it ends.

Now this has to be THE best answer I have seen in a long while... :thumbs:

I have no reason to fear directly because I have no credit, don't plan to get any credit and am now sure they'd tell me no. I'm kind of releived so I tossed the stack of credit card offers in the trash.

I was listing to one economic expert today and she got real excited talking about how this thing will directly impact Main Street more than we know. She went on to say we won't get a loan for a car (not my worry), or a house (not my worry) and small businesses won't get loans to make payroll (I never thought to try that).

I still haven't seen how the scare impacts my economic level.

 

[Major B]

I'll tell you how terrified I am.

I'm buying a house next Monday.

Everybody gotta be someplace.

 

[Major B]

Now this has to be THE best answer I have seen in a long while... :thumbs:

I have no reason to fear directly because I have no credit, don't plan to get any credit and am now sure they'd tell me no. I'm kind of releived so I tossed the stack of credit card offers in the trash.

I was listing to one economic expert today and she got real excited talking about how this thing will directly impact Main Street more than we know. She went on to say we won't get a loan for a car (not my worry), or a house (not my worry) and small businesses won't get loans to make payroll (I never thought to try that).

I still haven't seen how the scare impacts my economic level.

I consolidated all my debt, most of it from helping our handicapped son, into a low fixed-rate loan last month. Timing was totally an act of God.

 

[LeBuick]

I just applied for another big extension on my business credit. raying:

Should have put me down as a reference... I could transfer the call to Ken who would make sure you get what you deserve... :thumbs:

Just kidding, we'll keep you in prayer... raying:

 

[targus]

I heard a commercial on the radio by a mortgage company yesterday.

It started with... "The government is going to guarantee home mortgages..."

And ended with... "Cash for a vacation... consolidate bills... buy a second home..."

I think that the mortgage industry wants this bill so that they can continue with business as usual. :BangHead:

 

[ReformedBaptist]

God has not given His people a spirit of fear, but of power, love, and a sound mind. In times like these people are anxious and fearful. Be anxious for nothing, but in everything be in prayer and supplication. Our life is not in houses, food, clothing, bank accounts, et. Jesus Christ is our life.

In a day of trial will we shake?

 

[Andy T.]

I love the answers to this thread, because it shows the greatness of the Biblical view that puts all its trust in the Lord in contrast to the anti-Biblical view that puts its trust in other things like the economy and which politicians get elected. Amen to the former.

 

[Pastor Larry]

Markets are inanimate. They don't fear. Only people fear. And yes, people are scared, but hopefully most are sensible enough not to panic. The market will come back. It always does. Even in this bad economy, the market has done fairly well over the last five years. I don't think the worst is over yet, and the days ahead will not reveal that to us. But the market comes and goes. Overall, the 2000s have been pretty good. We were in a recession in 2000 during the election, and are probably in one now. But this too shall pass. Trying to time the market is a bad thing.

 

[Revmitchell]

With all the bank failures our economy is still standing. The economy must be pretty strong. We have had consecutive growth in the economy. It remains strong. If it were weak it would have crumbled. There is nothing to be afraid of and no reason for the unconstitutional bailout. The market is up 264 right now.

 

[Matt Black]

Whilst I understand the reluctance of the US Congress to bail out the Wall Street fat cats using their constituents' tax dollars (I have to admit that that would stick in my craw too - as does the nationalisation of Northern Wreck and Bradford and Bingley over here), nevertheless the alternative is too awful to contemplate: a range of bank failures with the savings, investments of The Little Man wiped out,and a massive hike in mortgage rates hitting hard-pressed home owners. The choice it seems to me is between being a bit worse off as tax payers and being a lot worse off as savers and borrowers, between tightening our belts and not being able to afford any clothes at all. Congress' actions are comparable to the fire brigade turning up to an apartment block to deal with a fire that's been started by one careless family and refusing to dowse the flames or rescue the other residents simply because the fire has been started by the negligence of just a few. But then, "what do I know?"

 

[tinytim]

The price of Oil is dropping, and I heard this morning that the price of homes are dropping as well... Can anyone say "affordable housing"...

I thought prices were supposed to skyrocket....

In God I trust... All others must pay cash!

This is the text I preached from this past Sunday.... I felt it spoke directly to me and others in our church that were concerned about what congress and the Bush administration was trying to do....

Psalms 37:1-7
(1) A psalm of David. Don't worry about the wicked. Don't envy those who do wrong.
(2) For like grass, they soon fade away. Like springtime flowers, they soon wither.
(3) Trust in the LORD and do good. Then you will live safely in the land and prosper.
(4) Take delight in the LORD, and he will give you your heart's desires.
(5) Commit everything you do to the LORD. Trust him, and he will help you.
(6) He will make your innocence as clear as the dawn, and the justice of your cause will shine like the noonday sun.
(7) Be still in the presence of the LORD, and wait patiently for him to act. Don't worry about evil people who prosper or fret about their wicked schemes.

 

[Major B]

Psa 91:5 "Thou shalt not be afraid for the terror by night; nor for the arrow that flieth by day;"

 

[tinytim]

Whilst I understand the reluctance of the US Congress to bail out the Wall Street fat cats using their constituents' tax dollars (I have to admit that that would stick in my craw too - as does the nationalisation of Northern Wreck and Bradford and Bingley over here), nevertheless the alternative is too awful to contemplate: a range of bank failures with the savings, investments of The Little Man wiped out,and a massive hike in mortgage rates hitting hard-pressed home owners. The choice it seems to me is between being a bit worse off as tax payers and being a lot worse off as savers and borrowers, between tightening our belts and not being able to afford any clothes at all. Congress' actions are comparable to the fire brigade turning up to an apartment block to deal with a fire that's been started by one careless family and refusing to dowse the flames or rescue the other residents simply because the fire has been started by the negligence of just a few. But then, "what do I know?"

What you are seeing is the American People sick and tired of our Government yelling "wolf"....

We simply do not believe the congress or President.
They have lost our respect, and we hate to be pressured into doing something because we have to "act now"... It feels like Bush is a used car salesman that has burnt us one too many times...

So, people have been calling their representatives telling them to vote no...
I know I did... and I encouraged others too as well. (Mine didn't listen to me... he voted yes.... but his constituents here overwhelmingly wanted him to vote no... I wonder what the vote will be for him come election time!)

Time had an article today that hit the nail on the head... it sums up my feelings... http://www.time.com/time/nation/article/0,8599,1845655,00.html?cnn=yes

http://www.time.com/time/nation/article/0,8599,1845655,00.html?cnn=yes

"There was a lack of trust, a loss of confidence, a popular revolt.
Nearly every major political leader in America supported the $700 billion financial bailout bill. The President of the United States. The Vice President. The Treasury Secretary. The Chairman of the Federal Reserve. The Chairman of the Securities and Exchange Commission. The Democratic and Republican nominees for president. The Democratic and Republican leadership of the House and the Senate. All of them said the same thing. Vote yes.

But a majority of those politicians anointed by the U.S. Constitution to reflect the will of the people voted no. This is a remarkable event, the culmination of a historic sense of betrayal that Americans have long felt for their representatives in Washington D.C. The nation's credit crisis exposed Monday a much deeper and more fundamental problem — a political credibility crisis that now threatens to harm our nation further, should the markets freeze up and more companies begin to fail, as many experts predict.

The problem has been growing for years. Roughly 28% of Americans approve of President Bush. Roughly 18% of Americans approve of Congress. Now those bad feelings have manifested themselves in the starkest of terms."

"What this showed more than anything else was that not even members of Congress can ignore a switchboard system of Capitol Hill that is so totally jammed," said Peter Sepp, a conservative opponent of the bill with the National Taxpayers Alliance."

http://www.time.com/time/nation/article/0,8599,1845655,00.html?cnn=yes


Simply put, we Americans know that the politicians in DC are liars...
Why pay out $700 Billion just because liars tell us we should...

Also, we know Capitalism works..
And this bailout was simply Socialism...

I also became concerned when Pelosi said in the press conference Sunday afternoon that there would be caps on CEOs salaries...
Now I agree, some salaries are completely scandalous, but I don't ever want to set a precedent where the Government can tell a business what they are allowed to pay their employees...

Pelosi, Bush, Reid, Obama, McCain, and the other leadership are so out of touch with what the original fathers of our country intended, it is not funny, and the American people have had enough....