Commentary

Blue Market Monday

The market giveth on Friday and taketh away on Monday.
It seems that panic was in vogue today as more bad news
surfaced concerning the lousy state of the nation’s financial
institutions.

The Dow Jones forfeited just over 240 points, and the
broader Standard & Poor’s 500 index sank a hair more than
25 points. The Nasdaq felt the pain as well, shedding almost
50 points. In percentage terms, each index lost approximately
2 percent to start the week on a less than glorious note.

Before the open, the Financial Times ran a story concerning
a South Korean bank regulator’s hesitation toward the Korea
Development Bank’s idea of purchasing Lehman Brothers,
the highly distressed U.S. brokerage company. The regulator
was critical of using state money to buy such a heavily
burdened institution. (He recommended the use of private
funds instead.) This helped send the shares of Lehman Brothers
down by 4 percent.

Then, an hour after gambling began, Marketwatch reported that
Credit Suisse Group analysts took a swipe at American International
Group when they raised the possibility that the struggling
insurance giant could take a cold third quarter earnings bath due to
large write-downs of their deteriorating derivatives portfolio.
AIG shares swooned by 5.5 percent as a result.

Funny how manic this market is these days. Just Friday
investors were rushing out of the gates, sopping up the
soothing remarks of Fed chairman Bernanke, and bidding up
the shares of financial stocks as if happy days were really, truly
here again. With Monday’s unpleasant news, the very same
investors are blue once more.

It seems that until all of the red ink is reported, the share
prices of America’s financial companies will be riding the
headlines up and down. I, for one, counsel patience- and
if you register a nice gain punting on these stocks, cash it
in for a good night’s sleep.

©Greg Strid 2008

© 2008 Splendid Marbles.