850 Billion dollar bailout and this is how the market reacts? Fasten your seatbelts.

Come on man. 14 years ago, the Dow was at 3,700 or so. Get a grip on the facts.

http://finance.google.com/finance?client=o...;q=INDEXDJX:DJI

But hey, keep fanning the panic.

The 700B bailout hasn't done anything yet. It will relieve a credit crunch. It will take a long time for credit relief to be reflected in the market. The two are related but there are many things that will influence a market comeback. Not the least of which is when all the people who have pulled their money out of the market in the last year start pouring it back in.

keep dropping lower! I am only 33 and I just ramped up my 401(k) contribution.

Of course by the time the effects of that 700B impact the credit market, it will also be screwing with prices. How much will be people be investing when gas goes up another few bucks?

I'm guessing that over the next 3-6 months, the dow goes up again, but over the next 1-2 years, it all comes tumbling down.

Oh look, now Bernanke says he might lower the interest rate to help things out!

http://www.cnbc.com/id/27070225

It's almost like they are trying to detroy everything.

Something I'd like to draw attention to:

"Inflation" does not mean a rise in prices. A rise in prices is the RESULT of inflation. Mr. Bernanke knows this of course, but the wording is designed to draw attention away from what is actually happening. Inflation refers to the increase in the money supply. By printing more and more money (by way of tax rebate checks, 700B bailouts, and hundreds of billions used in bailing out Fannie/Freddie/AIG), you inflate the dollar and cause an increase in prices as the economy adjusts. Not only does this raise prices, but it does not raise them uniformly, which means the everyday citizen is hurt by this more than governements and banks are.
Fortunately for guys like Bernanke, it takes time for all of this to happen. A few months, maybe a year, so that when the prices start to skyrocket, the blame can be pointed elsewhere.

I don't know much about the stockmarket; I was never interested in it. But I do know about economics, and let me tell everyone something....be worried. These guys aren't even trying to be sneaky about this stuff anymore.

Could somebody PM me when it's time to start buying?

Wait, is this yesterday's "Dow tanks 500 points" thread or today's "Dow tanks 500 points thread".

Welcome to the real result of the Clinton "economy".

Give me a break. This has nothing to do with politics. This is American Economy, plain and simple. The decisions that have brought us here have been being made for decades, and no sitting president or majority congress had done anything but make things worse.

The problem with bringing politics into this is that people keep looking to blame someone. It's the republicans fault? We'll vote them out, and everything will be better. Same argument for democrats. It's all bull. Nothing but a complete overhaul of our economic system, starting with the Federal Reserve and Bernanke himself, will do anything to get us out of the hole we are currently falling down.

?? 14 years??? silly

Do what you want. I'm buying plenty. Nice high dividend stocks that are taking hits now. There are a lot of companies sitting on a lot of cash just like there are a lot of people now with a lot of cash they've pulled out of the market. Don't expect investors to prefer their mattresses to the market for long. When the money starts flowing back in, it will flow back in big time.

But also expect recession. As a country, we won't be out of the dark for a while. The good news is that all the current actions should put us WAY ahead of what's about to happen to the world economy. If you're planning a trip abroad, next year is looking good--the dollar should be kicking a lot of currency tail by then in spite of all the funny money we're printing.

My fault. . But honestly, I was going off of what I heard on the local radio news. It is the lowest in 4 years, but the reporter must have misread or was given a wrong report. Sue me.

Hopefully you won't be able to say the same thing tomorrow. My 401 K is down 20 G's.

Johnny Coli says you're rich.

Also, drop dow drop! I'm starting a new job that has a 401k, so I'll get to start pumping money into it soon. Hopefully I'll hit it right at the lowest point.

Can I have some examples? I wasn't being a smart ass before.

How's that going to work?

Awwww Snookums... didn't anyone tell you? The game of 'pin the tail on the donkey' was over YEARS ago.

Edit: I removed a somewhat warranted gold star reference to replace it with an actual, possibly constructive, non-rote thought. Though I do personally believe Clinton should shoulder some of the blame(sub-prime lending practices began during his tenure TTBOMK), there is no way - even a person in the dark 20 hours a day - can look past the deregulation of our financial industries as a major impetus. Corruption and abuse fueled by a lack of oversight are, I can see no way around it, the primary causes of this mess.

Too bad we didn't privatize Social Security while the markets were HOT!

I am proud to say, I have lost no $$ in the recent stock market decline. I did lose all my money, let's be clear...but I SPENT it! I enjoyed what got me to poverty.

heroin and mail order brides?

Europe and Asia's little bit of Schadenfreude is catching them off-guard and they are not moving as fast or as confidently as the US. They are going to get swamped by this. Europe in particular is a mess because the Euro is not governed by a country and Europe has no central bank. Trying to get all those countries to agree on monetary policy won't happen.

This is just a prediction. I would not have thought we'd be at Dow sub 9000 shortly either. But what looms in Europe is bad news and the USA is a better place for money than anywhere on the planet, despite all our problems.

I'm not smart/dumb enough to do that. I can just tell you taht I'm looking for big blue chip stocks whose prices have taken a hit but still pay high dividends. But I'm not in "the game" much. Most of my money is allocated in funds appropriate for someone my age, which means it's getting reamed.

Well, let's say about 90% on that. The rest, I just pissed away.

While I don't claim to be an expert, I completely disagree with your outlook. While you're right about Europe (after WWII we took advantage of their broke economy and tied them to the dollar, so yeah, they're screwed), Asia's has far stronger future markets than the US right now. Japan may be the exception, but if they ever decide to tell us to F-off, they would probably turn into the new "center" for economics in a suprisingly short time.

Again, I'm not saying your wrong (nobody is right or wrong at this point because nobody knows what's going to happen), only that all my study in economics points in the opposite direction. Everything we are doing to "right the ship" right now is pushing us further and further into the hole. They MAY be able to create one more short term "bubble", but I think that's about it. Hopefully I'm wrong.

EDIT: BTW, central banking is one of the first things we did to set ourselves down the path to corruption. It gets rid of all the checks and balances on the banking industry. Without it, Fannie/Freddie/AIG/Wychovia, etc wouldn't have been able to happen. They would have been ousted by competing banks long before they were able to go so far under.

The EU hasn't been able to agree on much and they've had nothing but boom years since they formed. It'll be really interesting to see how it holds together during a real crisis.

Milwaukee's Best?

I'd love to argue but I have no idea. Predicting where this heads is like walking the stairs in an Escher.

I am ashamed to admit that I spent a very small amount of my earnings on Milwaukee's Best Ice. I have also spent several dollars on Steel Reserve. Let me just add that I was very poor and desperate, at the time.

Dow is overrated and is still overrated. It has been speculative for years.

I spent a few years enjoying (lol) Steel Reserve.

High Gravity Beer, baby!

My roommate still wont' drink beer, due to one of those nights years ago with Steel Reserve.

Steel Reserve! Best bang for the poor man's buck.

Exactly why we poor college students drank it. It was either that, or if we needed liquor, Kentucky Deluxe.

Um, what?

Sorry, having something called a central bank and getting it to act with so many puppet masters is another thing. There's no way all the countries can agree on what to let it do. How could it raise money? Raising taxes? That's a country by country issue.

So while it's called the central bank, it's had little work to do because the EU has been in such a boom since its inception. Things are going to be really hairy now that action is needed. Most countries are already preferring their own country-by-country solution rather than trying to fix the entire EU. (For example, why should Spain pay for the sins of Germany and vice versa.) I suspect that will continue to be the case.

How the EU comes through this will be interesting but not smooth. In the US, banks have deposits of 96 cents for every dollar loaned. In Europe that ratio is 1 to 1.4 Euros--not a good time to be a European bank.

They did manage to work in concert with other Central Banks to lower rates, which I agree is surprising. Also, this move is completely opposed to their normal "fight inflation" stance they've been in. "The ECB actions in this extraordinary environment will be the basis of study for economists in years to come." Sorry, I slipped into Cramer mode there for a second. I'm much better now.

Without true enforcement and regulatory powers over the private financial sector in the countries it oversees. Thus, a central bank in name only, because it has to play second fiddle to the finance ministers of each constituent country.

Replace 'Countries' with 'Exchanges' and it sounds just like the SEC. It's all very beguiling. Tiptoeing through these land mines, while exhilarating, is taking years off of my life. Too many talking heads jabbering about how this is the time to buy for it to be a true bottom. We need 'blood in the streets' then a nice long base to work this off. By then we'll be France.

every time I see a selloff like this I think of Randolph Duke.......SELLLLLLLLLLLLLLLLLLLLLLLLLLLL

Hence, not a central bank.

What's with today's roller coaster?

Fear & Hope in quite a sumo match. I've been bearish (and mostly wrong) since oil cracked (no pun intended) $70/bbl on the way up (~ Spring '06). I, like a lot of people, knew this was coming. I just thought it would come a lot sooner. When it didn't, I thought it would come later. One of the things I track is the percentage of stocks in the S&P 500 trading over/under 5 different moving averages. Yesterday was the first time all 5 were in single digits since I've been following it. I have no idea what it means, though.

So what's the big difference between lager and malt liquor??

Whoa. The Federal Reserve (the great US Central Bank) has set a 10% fractional reserve rate. If someone deposits 1,000 into an account, the banks can lend out 10,000. Not only that, but with the pyramid scheme of the central bank, that money is deposited into the central bank, then the central bank can lend out 10,000 dollars to the bank, and the bank can lend out 100,000. (that doesn't normally happen with individual account deposits, but technically it can. It DOES happen when the fed decides to counterfeit the dollar by buying it's own assets)

We are nowhere NEAR .96 cents to the dollar.

The only problem with my citation is that "outside Wall Street," the actual ratio is .96 to 1. (I left out the "outside Wall Street" from my memory....when I revisited this week's Economist, I saw that caveat.)

I did some quick Googling and can't find the overall US bank ratio.

1. The economist. The same people and frame of mind that are running things into crap right now are writing for the economist. They are bunch of self appointed genious that write based on theory instead of practice.

2. The actual quote is: "In America, outside Wall Street, the banks have lent 96 cents for each $1 of deposits." Which is opposite of what you wrote.

2a. There are no sources listed for that information, I've never read it before, and the whole idea of fractional reserve banking makes it highly unlikely that it's true.

3. America's wealth is on wall street. Saying "outside Wall Street" makes the whole thing kind of pointless.

That I got the ratio backwards from memory even makes the point more--still, it's close to 1-to-1. US banks are in a lot better shape than their EU counterparts.

Ae you sticking with your rough assertion that banks have loaned up to as much as 10X as much as they have deposited? Really? Or is just more fun to attack The Economist?

I read plenty more things than the Economist; it was just there that I saw the statistic. The WSJ backs the EU ratio of 1 to 1.4. I didn't find the US ratio easily.

John...they have.

Its called fractional reserve banking.

Basically, it works like this...

A bank has $1.00 (from where does matter, but not for these purposes). The Fed mandates that the bank must keep 10%. So the bank loans out $0.90 to another bank. That bank, with the same 10% requirement, can loan out $0.81. The next bank $0.725. And so on.

I realize my example is simplified, and there are many otehr factors affecting this notion, but the basic concept is there.

Point number 1 was my own opinion, probably could have been left out, but I really hate that rag. Kind of like Bernanke, less than 3 months ago in a congressional hearing, telling everyone we were fine. I'm sure the quote is off a bit, but something like, Our economy is on as sound a foundation as it has ever been on. 6 weeks later, we need 700B NOW or else the enitre economy will collapse. These are the people we are supposed to trust to do the right things.

As for the rest, yes that's what I'm saying. Since Bills_Fan already elaborated, I won't do so again. But even in your scenario, your saying everything is just fine that the bank doesn't have 96 cents of every dollar you have put into it. Even if it were that simple, that's nuts! At that point, they might as well be at 1.4...or 9.8...or whatever. At the end of the day, they still don't have the money they are supposed to have!

It's a good thing we have FDIC, even though they really doesn't have any money either. I think the last estimate I read was something like the FDIC could cover 1.5% of money it insures! After the last couple months I'm sure that has gone down...especially since they just more than doubled the amount they are legally able to insure.

The whole thing is a SCAM! The sooner people have some sense of that...well, nothing I guess. We're too deep for knowledge to even matter anymore.

Actually, now that I looked this over, I think you're moving your numbers the wrong way. They should go up. The FED doesn't mandate that they must keep 10%, it mandates that they have 10% in reserves to what they lend. The bank has a dollar, so they lend out 10.00. So they have 10% in reserves of the total amount they have lent.

EDIT: Sorry, I've been trying to get back here for a while to take this back. When I sat and thought about it, I realized we were saying the same thing, you were just being a lot more specific than I was.

Color me filled in. So is there a number that estimates the ratio of deposits to outstanding loans? And what of the Economist's analysis? Is it wrong?

(I am a GD patent attorney who finds himself roughly believing the "facts" in the WSJ, Economist, and Forbes.)

That 10% reserve is more than enough to offset risk in normal times, because your defaults don't run at 10% rates, nor do you have 10% of your depositors running away.

Now, if you think the whole thing is a scam, and we need to go back to a coin currency with zero lending to remove all risk taking from an economy, then by all means say that. But also, be honest with people to say exactly what kind of an economy you're advocating. It seems that you think that society will benefit by moving back to the standards & conditions of the Middle Ages.