Thursday, August 04, 2011

Is it 2008 all over again?

Well, it certainly feels that way. That was a serious sell-off today that never really relented. There were a couple of efforts to defend key technical areas but once they failed it was lights out for the market.

There will be lots of handwringing over why the market fell but put it in context. The market is still up roughly 10%/year over the last 2 years despite Middle East upheaval, Japan's earthquake/tsunami/&Fukushima, US debt dilemmas, etc.

The scariest thing making the rounds tonight is talk of bank runs in Italy and the need for a TARP style bailout of many European banks. It's worth noting that many US banks are also back at multi-year lows. If the tone doesn't change overnight, tomorrow could be very tough again. The jobs data has the potential to pivot the whole market but many people are really expecting a weak number (as well they should given the ISM service and manufacturing numbers earlier this week). The good news is that we'll know by 8:30am what the jobs situation is, but the bad news is that most won't have a way to trade around it until 9:30.

The market acted very poorly around this time last year which led to Bernanke embarking on QElite (which led to QE2) after a 8/9 speech at Jackson Hole. We'll see what happens in 2012!

You'll hear a boatload of pundits telling you why the markets were down but it's really quite simple:

* A weaker global economic outlook.

* The Fed has no way to rescue the market this time.

* People have suddenly realized the US has a debt issue.

* Good luck passing another stimulus program.

*Europe's problem dwarf our own.

Cheers! You'll need it.

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