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‘Ugly’ was the word for the stock market

By Staff | Nov 25, 2008

Ugly was the only word good enough to describe the market’s action last week as most of the major indexes fell to multi-year lows.

The Dow Jones Industrial Average fell to its five and one-half year low; the S&P 500 fell to its lowest level in just over 11 years; and even the Nasdaq Composite Index was registered at losing one-half of its value from its previous high.

You can take your pick at choosing the main reason or reasons that gave the major indexes their dramatic downdraft last week; the market and indexes can stay low or go even lower? Obviously, the answer last week was “to go even lower.”

Or, if you are an experienced long term investor – and you haven’t panicked yet – you are probably looking at the long term “expert analyst” rule that suggests that, what the major indexes did today is not so much reflective of the current market and economy today and this week as it is a real leading indicator of what the U. S. economy and its markets should look like about six to eight months from now.

If this is the case, then, the market should continue to be problematic as it digests the U. S. government’s offering of several different billions of taxpayer dollars to make healthier our country’s major financial institutions; to give the “big three” U. S. automakers and all of its employees, dealers, and suppliers of various parts nationwide with bridge loans to help them to weather their current short term cash flow crunch; is the market giving its opinion of President-elect Obama’s plans to raise taxes to fund new spending programs; or is it the government’s failure to address the subprime mortgage and foreclosure problems by providing any number of options for those mortgage holders to keep their homes and still pay their mortgage obligations?

Is the answer all of the above; a., c, and d; or is it some of the above; or is it none of the above? Take your pick and register your answer.



Oil now below $50

a barrel, gasoline

under $2 a gallon

Even with the price of oil falling below $50 a barrel – a price not seen in more than three years – and the price of a gallon of gasoline falling below $2 a gallon at the pump had no real positive effects on the economy.

Unfortunately, these dramatic decreases in the price of oil and gasoline had no real impact on either the foreign and domestic economies, as well. Instead, these decreases in the price of energy were seen more as a reaction to increasingly bad economic scenarios that have now become much more prescient around the globe.

Asia-Pacific economies

now showing increasing signs of weakness

Singapore, late last week, became the third Asia-Pacific nation to officially be identified as in recession after its past two quarters were noted as being “negative and in contraction.”

More specifically, Singapore’s third quarter GDP contracted 0.6 percent in its third quarter, down from its third quarter last year, or 6.8 percent from the previous quarter.

The quarterly GDP results, also released last week,

showed that both the Japanese and Hong Kong economies had shrunk for the past two quarters, too.

“These tiny trade-dependent city states (such as Hong Kong and Singapore) are very much plugged into global trade and they do tend to fluctuate in sympathy with global trends,” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.



At least home

during the holidays

In a “spirit of the holidays” move (at least we’ll give them credit for doing something right for embattled subprime mortgage holders), both of the nation’s largest mortgage holders and backers of most of the mortgages issued in America, announced that they were suspending all possible foreclosure sales and evictions from November 26 through January 9.

Both of these government-controlled mortgage companies said that they were ordering their national network of mortgage servicers and foreclosure attorneys to prohibit the sale of foreclosed homes for single-family and two- to four-unit properties with mortgages owned by these two government-controlled mortgage issues.

At least these mortgage owners will know that they’ve got some new time to renegotiate their mortgages, while still enjoying the Thanksgiving, Christmas, and New Year’s holidays in their own homes.

Meanwhile, we hope that you will enjoy the next several weeks of year-end and new-year holidays. Enjoy your holidays.



Paul Rendine is the owner of the Rendine Financial Group, LLC in Salisbury, MD, offering securities through First Allied Securities Inc., Member FINRA/SIPC. You can reach him at 410-860-1137 or at his email address at prendine@1stallied.com with any questions or comments.