Panic Selling

August 8th, 2011 at 10:10 am

OMG—Marketwatch just ran a banner: “Global Markets in Disarray.”

The volatility index—a measure of spikes and dips in stocks—is way up.

The DJIA opened down more than 200 points, and is bouncing around like a manic depressive on a bad acid trip.

Meanwhile, the 10-yr T-Bill is down 10 basis points (one-tenth of a percentage point), basically telling S&P where they can put their downgrade, at least for now.

In other words, everybody calm the eff down.  Move along…nothing to see here…a credit-rating agency stepped out of line, and yes, we’ve got a lot of tough economic problems in the advanced economies.  And yes, the politics is making it worse.

Hmmm, not sure how that last part fits into the “don’t panic” message…more to come.

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8 comments in reply to "Panic Selling"

  1. ljm says:

    That last part doesn’t fit. It’s time to figure out a debt forgiveness strategy for real people to get out from under the weight of all the huge personal debt they took on in the years Bush told them to go shopping. You know, those boom years when they HELOCed their houses for more than they were worth during the days Americans had jobs, good paying jobs. Now Americans are scrambling to get any job so they can pay taxes to service the debt for the two Bush wars and tax cuts for the rich. I’m waiting for the “exploding backlash” when it hits them the taxes they have to pay remain to service that debt even though they’ve drowned the government in the bathtub. They will be screaming that they want their tax money to be going for services for them, not debt service.

  2. Matthew says:

    Hi there,

    There seems to be a landslide building around the idea of a double dip recession. Perhaps you could comment on your view of the nature of this recession? (Double dip Vs L shaped Vs U shaped)

    Also it seems that despite the sovereign debt issues in the US and EU subsiding (Based on rates), the equity markets are reeling. It seems like the moves in the stock market aren’t very relevant in the medium term unless they trigger a larger event. Thoughts?

  3. Carol says:

    DJIA closed down 633. It would seem the time to panic has come and gone. If you haven’t sold yet, it’s too late. It’s time to dig in and hope for the best.

  4. bakho says:

    How do you know the S&P is driving US stock prices? My guess is the Euro crisis and growth problems have more to do with sell off.

    Investors need to get out on the street and back promising ventures. About forty years ago my grandfather backed his buddies at the TV repair store to hire a Czech refugee to wire their small town for cable TV service. 15 years later, a big cable company bought them out for over 10 times the original investment. Lots of investments can be high risk deals if you don’t know the principles. However, if they are your neighbors and people you trust, then you have a better appreciation of risk than someone who lives in a gated community and doesn’t even talk to his limo driver.

  5. The Raven says:

    I think it’s expectations of low growth, not default. And–the markets are right. Nothing is going to be done about this, probably for years.

  6. The Raven says:

    On the positive side, it seems that Keynes is winning the intellectual battle; otherwise the markets would be cheering the cutting. But it’s going to be years before that is felt in the marble halls and marble heads of Washington and European capitals.

  7. Jim Edwards says:

    Forget the rating downgrade. This is a Wall street firm that said the US is heading into the toilet because Republicans are behaving dangerously. When you or Krugmann or others say it, it’s leftist pinko commies who don’t know anything cause they’re not rich. But, when a Wall street powerhouse says it, OMG We’re all gonna die!

    Goldman, etc. says it quietly in an analysis, but this was shouted from the rooftop. Turn them into an ally whether they want to be one or not.

  8. Steve Roth says:

    I don’t get why people make this so complicated.

    We got a deal. Stock market investors didn’t like the deal.

    Not surprising: It was a profoundly sh***y deal that ensures somewhere between sh***y growth and a second recession. (I guess stockholders believe in the stimulative effects of stimulus…)

    End of explanation, no?

    Except: bondholders loved it — a flight to safety goosed their wealth circa 10% (real and almost instantaneous), and no inflation in the foreseeable future. Rockin’!