Stocks Stomped in Financial Freefall

Originally posted by Manawydan

Originally posted by grimreaper797
reply to post by lynn112

 

People not having credit isnt what we are worried about, its companies not getting credit. If this happens over a long enough period, they will shrink considerably, meaning unemployment will rise considerably.

A silly question on my side no doubt, but I honestly don't know better than to ask. Would you say that companies that relay so heavily on credit to business should contract, seeing that they've over-expanded to the point that their income no longer supports their size?

I mean how much credit can they expect to keep getting?

Or am I complete wrong on this?


Kind regards.

I don't think it's a silly question. Should we just keep giving them money or should we cut them off at a certain point? When will enough be enough?

They built these companies on the backs of everyday people & now they are placing the burden of fixing it on those same people. Why not let the little guys have a fighting chance? Why not boost our small businesses rather than these monsters? (One's we have created by allowing them to get this big)

reply to post by Manawydan


Its an issue of a sudden contraction that is damaging. When anything happens suddenly, more damage occurs than need be. Sudden inflation, sudden deflation, etc. They are bad. Things that happen suddenly, often cause extra damage that would not have happened otherwise.

Having credit almost completely pulled from under them is like having the carpet ripped out from under you. You cause damage that never would have happened had you slowly removed credit from their function. They would have time to adjust.

Right now they don't have time to adjust, so massive damage is inflicted.

reply to post by burdman30ott6


What? Zero? Really?

If it was at 0, there would be no buying at all, and the stock market would completely crashed a week or two ago. There is some confidence, just not nearly as much as we had before this crisis. There is some confidence that lending practices will return.

For you to say confidence is at 0 is just ignorant. For confidence to be at 0 would mean nobody was buying stocks at all.

reply to post by grimreaper797


I'd take being set back decades any day over this mess that, in all likelyhood, my grandkids will still be paying for decades from now.

As far as technology. WTH cares about the latest robotics advancement when people won't be able to feed their families?

Sorry, but while the bailout may put it off, but I doubt it's going to be the savor so many are expecting it be.

Originally posted by The Axeman
And it would have without the godforsaken bailout, too!

Ok, so what would stop the credit market from further freezing over then? That is what is causing all this. A lack of credit. Its why GM fell, its why the banks are hurting. Credit freezing up because bad assets.

The bailout will get rid of those bad assets.

Without a bailout, what would causes the banks to resume lending before, say the 2nd quater of 2009?

[edit on 9-10-2008 by grimreaper797]

7500-7700 is the bottom, we fell to there during the last bear market.

I wouldn't rule out an interest rate cut in the UK and the Eurozone tomorrow, the markets are going to need shock treatment on Friday.

DJIA at -7.33% and it looks like it will stay around there 'till closing.
This is the closest to "holy crap" I've seen in a while.
I wonder who exactly is going to profit from this mess, because I bet that somebody does, and hugely so.

reply to post by lynn112


Yeah, lets all become a 3rd world country in the name of small business having a "fighting chance" as if they don't right now.

Point is, there won't be any mass starving in the US. Chances are good unemployment won't pass 10%. That less than half of the great depression. Lets throw progress away for stubborn ideals.

reply to post by grimreaper797


The bailout is not getting rid of the bad assets, it's just transfering them to the backs of the American people. Tell me how exactly it will help when the consumers have no more buying power, when we can no longer afford to buy from these companies that we have bailed out? I'll tell you what will happen, they'll fold, file bankruptcy & we'll be burdened with even more bad debts.

Something more interesting, believe it or not, traders are calling this a crash due to the "free fall zone" was breached.

Even though we didn't hit 10%, this is being called a market crash.

Originally posted by grimreaper797
The bailout will get rid of those bad assets.

No, it forces the American people to pay for them, with the assurances of the jackasses that cooked it up that it will all be OK. I.E. We get stuck with the junk.

Without a bailout, what would causes the banks to resume lending before, say the 2nd quater of 2009?

Maybe they wouldn't. Maybe it would hurt. Certainly it would. There would be problems.

My point is, I'd rather US sort out the problems and deal with it than our kids having to deal with it WORSE however many years down the line. All this bailout did was put them on the hook for "bad assets."

Fractional reserve banking and credit is the root of the problem.

I have another interesting historical fact:

This is the worst stock market slide since 1937, we are not far off the 1929 levels. Heaven forbid, another week of this would be very, very alarming.

reply to post by infinite


Sure that will help for ooh say a day! It just makes money cheaper when they do that! And cheap money is what got us into this in the first place! Hey maybe the FED will inject a few more trillion into the market that will fix it! OOH what that has the same effect! Cheap money= false sense of security for a day or to at most.

Originally posted by lynn112
The bailout is not getting rid of the bad assets, it's just transfering them to the backs of the American people. Tell me how exactly it will help when the consumers have no more buying power, when we can no longer afford to buy from these companies that we have bailed out? I'll tell you what will happen, they'll fold, file bankruptcy & we'll be burdened with even more bad debts.

The difference between a recession and a depression is this bailout.

Taking these bad assets off the bank ensures that the companies that employ you, will keep you employed. They hire you. They run of credit. Banks give credit. That means they are dependent on banks. Banks have bad assets so they hoard cash to not get caught with their pants down should they need to raise capital. They stop lending. Business can't get credit. They let you go. They have to decrease production. Costs rise.

So now the costs of living rise, employment rises, and you are SOL.

reply to post by infinite


our economy fell from a much higher level than that of the time before the great depression....so in retrospect we have a lot farther to fall to get to the 1929 levels....hence this would be a deeper fall

grim, lynn thank you both for your kind replies. I see your point on drastic movements and how they effect those who would otherwise be sailing along smoothly. Ultimately though, those who need ever-progressing credit in order to stay afloat only postpone the inevitable and contribute to the overall debt. Kind of what's happening right now, you could say.

reply to post by grimreaper797


I'm not saying third world country, I'm saying we need to step back & really look at where this mess all started before we start to throw money at it. How can they possibly fix anything when they ignored the problem until it was staring them in the face?

We, the people, should of been part of the process. We should of had a say in what companies needed to be saved, if any & we the people should not have to worry about what company is going to be next to say "where's my bailout?"

Originally posted by The Axeman
Maybe they wouldn't. Maybe it would hurt. Certainly it would. There would be problems.

I gave you a star for understatement of the year. The damage of multiple quaters of frozen credit markets would be unimaginable. THAT kind of freeze would make the great depression look like a hiccup. Look what less than a month of credit freeze has done to the stocks. Multiple quaters? Thats half a year or more. We can't even imagine the damage that would cause.

Dow Jones +27.00 8625.00 10/9 4:31pm

Well good news it stopped dropping for now.

Gold only rallied up an additional $24. Not really enough to absorb the losses from the DOW. I'm wondering where did all those billions/trillions go?

reply to post by infinite


I've got to say it's the most orderly market crash I've seen if that's true. I'm thinking Tuesday will be the bottom, probably around 7000 pts. A lot of action on DXD (Dow Shorts) in the aftermarket and they're bidding it up about $3 over the closing price, that means they're expecting at least a 300 point drop tomorrow.