Thursday, September 22, 2011

Rule 48 is in effect. This is not a DRILL!

The Dow fell 400 points today even after New York Stock Exchange executed a rule designed to keep down the panic. The exchange invoked Rule 48, which limits how much information is released about stock trades by the designated “market makers“. In other words the big guys will trade behind closed doors, and you can just guess what‘s really happening. How this is supposed to calm the markets I‘m not sure, maybe what the suckers don‘t know won‘t hurt them?

The US did do better than the 5% or more drop on the European markets, Asia wasn’t as bad Thursday but they are a day ahead, we’ll see how that’s going in late evening here as the sun rises in Japan. China says things are weak in manufacturing, and China had been the one ray of hope the rest of new “flat earth” was clinging to. Fedex has drastically cut its earnings forecast as people aren’t buying electronics and toys from China. The VIX or Volatility Investor Index, also known as the FEAR index which measures the average investor’s feelings of panic, rose 17 percent to 43.7, well above the normal.

The market falling was metaphor for the subject of  President‘s speech today or maybe the other way around. The president stood in front of an aging bridge that connects Ohio and Kentucky as he put it to Republicans: "Help us put this country back to work. Pass this jobs bill right away." Republicans called his appearance in front of the crumbling, overcrowded, obsolete but vital highway link, a stunt.

Speaker Boner was unable to pass a continuing budget resolution as the tea baggers rejected it supposedly because of a billion dollar amendment that Eric Cantor (normally their favorite) had slipped in the budget to pay for earthquake damage in his district. If Congress can’t pass a bill before they leave on Yom Kippur break, then the Federal Government will grind to a halt on October 1. Speaker Boner is threatening to make the normally three day a week Republicans stay through the weekend.

All commodities including gold were down sharply today. The only things selling well were the USD and US Treasury Notes. As their price goes up of course interest yield on bonds goes down, the 3 month T-Bill is yielding 0.0102% and the 10 Yr Note is at 1.71% in trading today. If you bought them back in January and sold them today you made a tidy profit.

The Dow will need to drop another 485 points to qualify as a new Bear Market, that would be a 20% drop since the last high. Friday has started by now in Asia, we’ll see how it goes.