Wednesday, August 13, 2008

Financials Lead Stocks Lower Again

There simply is no light at the end of the tunnel through which financial companies have been navigating.

Credit conditions have deteriorated to a point at which the entire global financial system is in a seizure while financial firms - banks, brokerages, combined entities - continue to reveal just how poorly managed their monies have been.

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They are now in desperate race to shed toxic assets as they begin to savage each other with downgrades amid lawsuits brought by states, municipalities, funds and investors of all stripes which invested in subprime, alt-a or other non-creditworthy tranches of securitized obligations.

It is an absolute mess, with no end and no solution other than to dispose of assets at fire sale prices and hope for the best outcome, which, in reality, is a severe global recession. Billions and billions of dollars worth of assets are being sold for pennies on the dollar as a result of loose lending standards, lax oversight and naked greed.

Dow 11,532.96 -109.51; NASDAQ 2,428.62 -1.99; S&P 500 1,285.83 -3.76; NYSE Composite 8,375.39 -23.32

Once the financial firms are finally tossed to the curb, the next phase will be an all-encompasing rout of stocks, especially those that are mismanaged, in need of capital or in any business outside of bare necessities. Most stocks will head lower over the next six to eight months. Those which avoid outright liquidation will be shells of their former selves.

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On the day, declining issues fared slightly better than advancers, beating them by a margin of 3253-2999. More stocks hit new lows than new highs, 199-117. Investors are seeking safe havens for their money, though the options in equities are highly risky. Every day seems to bring new horrors to a variety of companies suffering through tough economic conditions.

Oil stopped its slide for a day, gaining $2.86, to $115.99, still well below levels of just a month ago. The metals also gained, with gold higher by $16.90, to $831.50, and silver up 36 cents to $14.98.

The best way to make money in this environment is not to try to pick winners, but losers, and sell them as short as possible until November. Volume has been anemic this week, exemplifying the general lack of enthusiasm for equities in general.

NYSE Volume 1,210,340,000
NASDAQ Volume 2,029,940,000

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