Sunday, August 23, 2009

What the @#$% Happened in September-November 2008 Part IV

The one-year anniversary of the Cascading Market Crash of September-November 2008 is fast approaching, I thought I'd better get on with this project of listing events that led up to and constituted the crash through news headlines.

So, this is Part IV of "What the @#$% Happened in September-November 2008" series. (Here are Part I, Part II, and Part III.) It covers from October 6 to October 10, 2008.

The bank bailout bill just passed the House on Friday October 3, and contrary to what the financial media pundits had been warning us ("If the bill doesn't pass, imagine what that would do to the stock market!") the stock market went down 4% that day. The same pundits' spin was "it's a sell-the-news event, just a profit-taking".

They couldn't have been more wrong. The week of October 6 was when the stock markets around the world took a sharp nose-dive. They kept going down, day after day. It was downright scary.

With that in mind, let's go to the headlines of Investor's Business Daily front pages. As before, the indices' numbers are those of the day prior to the date; the same goes for the news headlines.

Tuesday October 7, 2008
(Dow Jones Industrial 9955 (-370), S&P 500 1056 (-42), Nasdaq 1862 (-84))

  • Stocks Dive Around Globe: SYP 500 slumps 3.9%; commercial paper may be Fed's next rescue target. At one point, S&P was down 8.3%. German DAX down 7%, French CAC-40 down 9%, FTSE down 5.8%, Russian Micex down 18.7%, Shanghai down 5.2%, Nikkei down 4.3%.
  • Credit Crisis Storm Front Hits Europe: Commodities plunged, except gold. Dollar soared.
  • Fed Mulls Creating CDS Market
  • Dems Blame Gramm Act for Crisis; Experts Disagree (The Gramm-Leach-Bliley Act repealed the 1933 Glass-Steagall act.)
  • Picture of a rather terrified futures trader at CME
Wednesday October 8, 2008
(Dow 9447 (-508), S&P 996 (-60), Nasdaq 1754 (-108))

  • Fed Action doesn't Stop Selling: Major Indexes Off 5%-Plus; Central bank to support commercial paper market; Bernanke hints at rate cut
  • Britain Set to Recapitalize Ailing Banks; RBS Dives 43% on Rating Downgrade; Traders Want United Action [This immediately gave Hank Paulson an idea to do the same, instead of buying the toxic assets as was originally planned.]
  • Pension Funds Have Lost $2 Trillion
  • Consumer Credit Fall, First in Decade
  • Brokerages May Fold, But Activities Won't [and most of them are still with us..]
  • Picture of a tired-looking Ben Bernanke
Thursday October 9, 2008
(Dow 9258 (-189), S&P 984 (-11), Nasdaq 1740 (-14))

  • Stocks Retreat Despite Rate Cuts: Central Banks Act In Unison. "Stocks rallied much of the day, but ultimately closed lower for a sixth straight session..."
  • Bold Actions Blunted As Markets Still Fall
  • Q3 EPS Targets Falling Sharply on Credit Woes
  • Treasuries Sink On New Supply
  • U.K. To Buy Stakes In Big Banks
  • Pending Home Sales Jump 7.4%
  • Consumer Jitters put A Damper On Sept. Store Sales
  • Japanese Stocks Tumble 9.4%, its worst loss since 1987
  • Pictures of British Prime Minister Gordon Brown, grim-faced traders on NYSE floor, and Hank Paulson calling for patience from a podium.

Friday October 10, 2008
(Dow 8579 (-678), S&P 909 (-75), Nasdaq 1645 (-95) )

  • Sell-Off Persists As GM Tumbles: Possible Rating Downgrade. GM shares fell to a 58-year low of $4.76.
  • Main Indexes Again Devoured: Stocks plunged to 5-year lows.
  • Plan B: Direct Cash Infusion To Banks?: Paulson Mulls Equity Stakes. Would be quicker than buying distressed assets; rescue bill has authority [TARP here we come.]
  • Credit Conditions Remain Tight: 3-month Libor rate hit an '08 high; the TED spread shot up to a record
  • Iceland Teeters as Top Bank Fails
  • China Still Growing Fast Amid Global Crisis
  • Bush, G-7 Finance Heads To Meet
  • A chart of GM's stock price since 1962, titled "GM's Long Descent"

Monday October 13, 2008
(Dow 8451 (-128), S&P 899 (-10), Nasdaq 1649 (+4))

  • Stocks Gyrate As G-7 Convenes: Paulson says U.S. will buy shares in ailing banks for fast capital injections
  • Stocks Mixed After Whiplash Day: The Dow dived nearly 700 points at the open, rallied, reversed toward its lows again, leaped into positive territory before closing down 1.5% for its 8th straight loss.
  • G-7 Sought Joint Crisis Response
  • Lehman Failure Sets CDS Record: Lehman's CDS settled at 8.625 cents on a dollar.
  • World Markets Hit By Sell Off: Nikkei down 9.6%, trading suspended in Iceland, Ukraine, Russia
  • Levered Investors Sell Anything Easy
  • Morgan Stanley, Goldman Drop (22% and 12% respectively), after Moody's said it may cut their ratings. [Morgan Stanley was already down about 70% in the past week.]
  • North Korea May Go Off Terror List
  • A chart of S&P 500 weekly movement. The benchmark S&P 500 finished the week down 18.2%, the biggest downdraft in its history.

During this week,

Dow went from 10325 to 8451, -1874 points or -18%.

S&P 500 went from 1099 to 899, -200 points or -18%.

Nasdaq went from 1947 to 1649, -298 points or -15%.

And we thought (or hoped) this was the bottom. I remember watching TV and seeing every news anchor, financial analyst, trader, pundit, government official looking like death. I do remember also that certain financial shows kept recommending stocks to buy. Just like during the Nasdaq crash of 2000, I thought.

"We have to do something." "American people want us to do something." They did something, like passing a very costly $700 billion bank bailout bill, rate cuts, new lending programs by the Federal Reserve. And nothing worked. A hasty trade in a panic is always a bad trade.


Post a Comment