Global Meltdown Pauses To Catch A Breath

Thrill the World:  Vivi Catches Her Breath‘world markets came back fighting’
Image by Word Freak via Flickr
Remember To Breathe

Last week’s hysterical plunge in the global markets became this week’s collective rally. It seems that after a week of taking a beating from the panic that seemed to grip everybody, the world markets came back fighting early this week.

On Monday, markets around the globe rebounded sharply, some showing historic and record setting gains. The rally continued on Tuesday with most major players finishing higher than yesterday, priming Wall Street for another up day.

Expected on Tuesday are more details about the US plan to invest in several major banks. News of the investments, similar in scope to measures announced over the weekend by European nations, helped drive the DJIA upward in a record setting session on Monday.

Remember The Alamo

But there are other reasons for the rally. Read what Irwin Kellner of MarketWatch has to say in his ‘Don’t Break Out The Bubbly Just Yet‘ article:

Monday’s rebound in the stock market was most welcome, but it does not necessarily mean that happy days are here again.

There are a number of reasons for Monday’s surge starting with the proverbial “dead cat bounce.” Stocks had plunged so much in such a short period of time that some bounce upward was inevitable.

Another reason had to do with capitulation. Time and again, when everyone throws in the towel after a prolonged decline, there is a selling climax, which invariably turns out to be the bottom for stocks in that cycle. This is what happened Friday morning when the Dow Jones Industrial Average plunged 700 points on the opening.

And guess who sold at this low point? That’s right, the small investor who turns paper losses into actual losses. And the saddest part of this is that many folks sold stocks that were in their 401k plans, meaning that they just lost a big chunk of the money that they were planning to retire on.

On a more positive note, the levels to which stock prices were driven encouraged bargain hunters to emerge from their foxholes. Many well-known stocks with long track records of paying dividends were selling at multi-decade lows by close of business Friday.

Of course, the statements issued by the Group of 7 nations at their meeting over the weekend (which, you should know, had been scheduled to coincide with the annual meeting of the World Bank and the International Monetary Fund), indicating that they would act in unison to bolster the financial system by injecting capital into the banks and virtually guaranteeing their loans, helped a great deal as well.

Indeed, while the stock market has provided all of the fireworks of late, it is really a sideshow to the frozen credit markets, which clearly is the main event. And as I observed last week, thawing them out involves restoring confidence among the banks, themselves, not to say between the banks and others.

He finishes the article with an upbeat reminder that we are, after all, still in a recession. And most economists are agreeing that this one could be rather long and hard, on all of us.

The real problem, as he points out in the last paragraph quoted above, is that the banks aren’t lending. The credit markets are frozen solid. And unless and until the credit markets start working again, we’re as doomed as the defenders of the Alamo.

And Don’t Forget To Laugh

Times like this I’m reminded of what my great-grandpa used to tell me. Whenever you feel on top of the world, remember you don’t live there. And whenever the world sits on your shoulders, don’t forget to laugh at the you that was once on the top.

Thanks to Mashable for pointing us to this video on Youtube. From the info found there:

This video was inspired by the bizarre sequence of events on the Street in 2007. The use of Billy Joel’s “We Didn’t Start the Fire” came from a hilarious internet parody song “Here Comes Another Bubble” by the Richter Scales (available on YouTube). They did such a good job, I thought Wall Streeters everywhere deserved a parody of their own. This version does not have anywhere near the same sophisticated flash software but here it goes.

The video was produced for non-commercial amusement purposes only and is not intended to offend any people, companies or countries appearing in the video.

I especially like the line:

‘Why is it Goldman is the only firm that always gets it right?’

I’ve wondered that alot myself….

I would be completely remiss if I didn’t also include the same link that Pete included to another parody Youtube video about the last bubble that burst. That video is one of the funniest things I have seen lately. If you’re into technology and the web at all you will think so, too.

I am Jon. Let’s be funny out there..