The Global Selloff Continues

Friday’s Panic Is Over, Over There.

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Russia has suspended stock markets indefinitely because the situation there is just too volatile.

The Japanese market posted its greatest one-day loss since their 1987 market crash. By the end of trading on Friday there, they had lost 24% of the market this week. That’s twice the rate of fall they had in 1987.

Australian shares closed down more than 8%, setting a record there. They are calling it ‘Black Friday’.

The Hang Seng index in Hong Kong dropped to a 3 year low.

In the Phillipines, the loss was similar to Australia, down a bit more than 8%.

Indonesia postponed plans to reopen their markets on Friday after suspending them for 2 days earlier in the week.

The Dow Jones Index closed Thursday down more than 20% already for the week.

No Trust Among Thieves

Panic is what it is. Folks around the world have simply lost confidence in their corporate and government leaders. There is no trust amongst the thieves, anymore. A year ago the DJIA was above 14000, today it starts out about 40% below that peak. Nobody really knows who is solvent and who’s about to go under.

Bankers especially don’t trust each other. The interest they charge each other for extremely short term loans was at an all time high on Thursday. This just shows how deeply the panic has permeated businesses worldwide. The BBC reports:

“We’re way beyond fundamentals,” said Chris Orndorff, head of equity strategy at Payden & Rygel, in Los Angeles.

“This is just pure panic, that’s all it is.”

It’s unlikely that the Dow Jones will fare much better today than it did yesterday. Until the banks start making loans again at an affordable rate, it’s doubtful there will be any recovery. And the chances of that happening soon are not good. The AP reports:

The sluggishness in the credit markets that triggered much of the heavy selling in markets around the world since mid-September appeared little changed even after a string of interest rate cuts by central banks in the U.S., Europe and Asia this week in an attempt to resuscitate lending.

“There’s no bottom to the stock markets now,” said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. “There’s no clue when it will stop.”

Oil prices plummeted to a one-year low below US$83 a barrel in Asia.

Yes, Virginia, There Is A Bottom

There is a bottom somewhere, but this isn’t it. I can’t pretend to know what the markets will do today in the US, but I can say with a fair degree of certainty that the trend is down in the short term, maybe even the medium term.

There’s a planned sale of some Lehman Brothers’ assets scheduled for today. If things go well there, maybe some cash will get freed up. Maybe some folks won’t be as scared. Maybe they’ll start buying again…

Or maybe not. A good sale of bad assets probably wouldn’t be seen as a positive sign, and might even spark another late afternoon stampede for the door. It’s times like this I like to remember Jon’s Last Rule Of Markets.

I am Jon, and I don’t have to play, to win.

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