Monday, September 15, 2008
A Global Readjustment
Bovespa falls below the 52,000 danger mark. It's currently below 50,000. That's been one of my triggers for well over a year. Selloffs on the European indices are in the 4-5% range. It's unlikely that we will see that in US stocks yet. Dow support now somewhere between 10,200-10,500, likely six month stable value centering on 10,500-10,700. (The way I calculate it).
The Lehman news will tend to suppress the dollar a bit, but that's actually decent for our manufacturers.
Oil is falling through the floor. There is no support, but I suspect some of this is people trying to make money off the down side, i.e., a speculative fervor of its own. Dated Brent spot below $90, WTI Cushing spot below $96, heating oil and gasoline futures falling significantly. The first possible support level I can see is around $78. I don't think anyone with the money is going to bet on it until then. It is highly questionable whether it can stop there.
What's occurring is an abrupt global change in valuations from relative value to real value. The effects will be momentous.
There's an excellent Bloomberg article describing the havoc wreaked on the real banks by Treasury's wipeout of Fannie & Freddie preferred stock.
It's not a good time to be holding stocks of companies with a lot of debt, that's for sure.