It's Now or Never
Market Update: 2009-02-20
Bank of America (BAC) is down 13% as I write, and Citigroup (C) is down 20%. Both are tanking to new lows, and for all practical purposes the two banks are almost gone. With America's largest banks crashing and the market on thin ice at support, we are now at the most critical junction in this financial crisis.
The government has one last chance to react, or we will see the stock market collapse. This weekend should be a very busy one for Washington. Either we suck it up and save America's capitalist system by having the FDIC take these two banks now, or we will have our chance to relive the 1930s.
I sure hope Mr. Obama and his team do the right thing before it is too late. Remember, if they do nothing and the S&P 500 breaks support at 750, the stock market could easily lose another 25-80% of its current value. If the stock market reacts as it did in the 1930s financial crisis, the S&P 500 would fall to 160; it is 772 right now. You do the math! The Dow Jones Industrial Index lost around 90% of it value during the Great Depression. For the S&P 500 to lose 90% of its record high which was just under 1600 in 2007, it would have to drop to 160. And that is not something any of us want to happen.
Right now cash is king, as you don't want to be left with no cash to take advantage of the buying opportunities that we will have in the next few years if the S&P 500 does break support. I increased my portfolio's cash position on Wednesday by selling some of my S&P 500 and large cap fund holdings. Either the S&P 500 is bottoming now, or it is getting ready to dive through support at 750. If Washington doesn't address BAC and C now, my put the odds of breaking support at way over 50%. It's pretty bad when a bear gets scared, isn't it?
We will know more by Monday. Until then, Happy Investing.
Gregory Guest
Bank of America (BAC) is down 13% as I write, and Citigroup (C) is down 20%. Both are tanking to new lows, and for all practical purposes the two banks are almost gone. With America's largest banks crashing and the market on thin ice at support, we are now at the most critical junction in this financial crisis.
The government has one last chance to react, or we will see the stock market collapse. This weekend should be a very busy one for Washington. Either we suck it up and save America's capitalist system by having the FDIC take these two banks now, or we will have our chance to relive the 1930s.
I sure hope Mr. Obama and his team do the right thing before it is too late. Remember, if they do nothing and the S&P 500 breaks support at 750, the stock market could easily lose another 25-80% of its current value. If the stock market reacts as it did in the 1930s financial crisis, the S&P 500 would fall to 160; it is 772 right now. You do the math! The Dow Jones Industrial Index lost around 90% of it value during the Great Depression. For the S&P 500 to lose 90% of its record high which was just under 1600 in 2007, it would have to drop to 160. And that is not something any of us want to happen.
Right now cash is king, as you don't want to be left with no cash to take advantage of the buying opportunities that we will have in the next few years if the S&P 500 does break support. I increased my portfolio's cash position on Wednesday by selling some of my S&P 500 and large cap fund holdings. Either the S&P 500 is bottoming now, or it is getting ready to dive through support at 750. If Washington doesn't address BAC and C now, my put the odds of breaking support at way over 50%. It's pretty bad when a bear gets scared, isn't it?
We will know more by Monday. Until then, Happy Investing.
Gregory Guest
Comments